We’ve all be told that it’s a good idea to preserve some of our money for a “rainy day”.

If you’ve been able to do that, letting it just sit in your everyday transaction account is probably not the way to make the most of it. One way to securely increase your savings is through a term deposit, which locks your money away for a period of time, earning a fixed rate of interest.

But what happens when your term deposit is coming to an end?

Term deposits are a way of investing money with an authorised deposit-taking institution (ADI), allowing you to invest for a set amount of time and get a fixed interest rate.

Their major advantage over traditional banking is that they often offer a higher interest rate than most transaction and savings account.

In general, the more money you put in and the longer you invest, the better the interest rate and returns.

Term deposits can be useful when saving for big items such as a car or in situations where you want to be certain about the interest you’ll earn on your money.

The term and rate can vary depending on the institution offering the product, the prevailing interest-rate on borrowing and the overall economic outlook.

Unlike a savings account where you can withdraw your savings at any time, a term deposit locks your money away for an agreed period of time (this could be as short as months up to years).

Maturity is the determined date at which the investment ends. Typically, when this date approaches, you’ll be advised and given the option to withdraw your money, transfer it to a savings account or elsewhere, or to sign up for another term deposit.

If you choose the re-sign, it’s important to know that you will not necessarily be offered the same rate or term, as conditions may have changed.

If you need to withdraw your money before the term expires, you may be required to give 31 days’ notice and you will likely receive a reduced rate of interest. As always, check the terms and conditions before you commit.

When your term deposit reaches maturity, you have a few options available to you:

• Rollover into a new term: Before your term deposit reaches maturity, have a chat with your bank and see if they’ll offer you a competitive rate to rollover your account into a new term. If you’d like to add more to your account, this is the time to do it.
• Withdraw some savings and re-invest the rest: You may choose to take out the interest you have earned, or another amount that you need, and reinvest the rest. Or you may find that you have extra money to put towards a larger term deposit.
• Open a new term deposit with an alternative bank: Before you commit to rolling over your account, shop around and consider other term deposit account options to make sure you’re getting the best interest rate/term for you.
• Withdraw all savings and invest elsewhere: Depending on your savings goals, another option to consider is withdrawing all your savings and investing them elsewhere (such as a renovation for your property or purchasing shares).

As with other investments, interest earned from term deposits is liable to taxation and should be reported to the Australian Tax Office at tax time.  

Before making any decisions, you should also think carefully about why you’re withdrawing or reinvesting your money. Have you achieved your savings goal? Can you afford to have the money unavailable to you if you commit to another term? Are you getting the best deal for you?

Scammers have been known to offer fake investments labelled as being “like a term deposit”. Beware of deals that appear too good to true, offering returns that “beat inflation” or guarantee unrealistically high returns. 

You may also wish to check that the deposit qualifies for the Australian Government’s deposit guarantee.