Pros and Cons of Term Deposits
By Alterna Team
February 07, 2022

It’s easy to get overwhelmed by all of the options available to you to invest your money. Which ones make the most sense to suit your needs and your risk tolerance?

If you’re risk adverse or looking to balance a higher-risk portfolio, a term deposit offers a great opportunity to invest your money and get guaranteed returns, with low risk.

What are the benefits of a term deposit?

Here are just a few great reasons to consider a term deposit for your balanced portfolio.

Choose the length of your term

Term deposits are available at a variety of term lengths, which puts you in control of selecting a timeline that best suits your needs. You can select from as few as 30 days up to five years.

Protect your principal

Term deposits provide guaranteed interest and your principal is never at risk. This provides security and safety for both your original investment and the amount of interest you can expect to receive over the term your money is secured in the account. Term deposits are also covered by Financial Services Regulatory Authority of Ontario (FSRA), up to a prescribed limit.

Added benefits

Investing in a term deposit could also be used as leverage to secure a loan as the money is locked in and can’t be accessed, serving as a reliable asset for the financial institution when weighing your loan eligibility.

There are additional types of term deposits, including accounts that offer guaranteed rising interest rates over time, or fluctuate with the stock market. There is something for everyone. We can help you go through your options to see what term investment makes the most sense for your savings goals.

What are the cons of a term deposit?

When choosing any financial product, it’s important to consider all of the associated conditions. With a term deposit, your money is not accessible over the length of the term. If you do need access to your money before the maturity date, you would need to demonstrate financial hardship and even then there may be significant penalties in place, including losing all of the interest generated over the term to that point. Ideally, a term deposit is a part of your balanced portfolio that includes accessible funds from other accounts, should you need them.

If you’re not sure if a term deposit makes sense for your short and/or long-term goals, we’re here to help. Make an appointment and we will walk through our savings solution and see if a term deposit is right for you.