Is it better to put money in a fixed deposit?

Recently, interest rates on fixed deposits have been rising, and high-interest fixed deposits are being offered, especially by online banks. This has expanded the opportunity to earn higher interest than with ordinary savings accounts. However, what are the differences between a "fixed deposit" and an "ordinary savings account," and why is it beneficial to put money into a fixed deposit? I will explain this in an easy-to-understand way.

1. Differences between fixed deposits and ordinary savings accounts

First, I will briefly explain the differences between fixed deposits and ordinary savings accounts.

• Ordinary savings accounts are a type of deposit where you can withdraw or deposit money at any time. They are convenient and characterized by being immediately available when you suddenly need money, but because the interest rate is very low, it is difficult for the money you have deposited to grow.

• Fixed deposits are deposits that require you to leave your money for a certain period (e.g., 1 month, 3 months, 1 year, etc.). You cannot withdraw the money during this period, but in return, a higher interest rate than that of an ordinary savings account is applied, making it easier for your deposited money to grow.

2. Benefits of fixed deposits

1. Higher interest rates can be earned

The biggest benefit of a fixed deposit is that you can earn an overwhelmingly higher interest rate than with an ordinary savings account. For example, while the interest rate for an ordinary savings account is often around 0.001%, you may be able to earn an interest rate exceeding 1% with a fixed deposit. In particular, some online banks are currently offering interest rates of 2% to 3%, which is a chance to grow your money much more efficiently than by putting it in an ordinary savings account.

2. You can grow your money systematically

Because you cannot withdraw money from a fixed deposit for a certain period after depositing it, you can save it without spending it during that time. If your household budget is stable and there is little concern about suddenly needing money, a fixed deposit becomes a means to efficiently increase your savings. It is suitable for when you want to save money systematically with a set goal, such as for children's education funds, future retirement funds, or travel funds.

3. Low risk

Since a fixed deposit is a principal-guaranteed financial product, there is almost no risk. As long as the bank does not go bankrupt, the money you deposited will definitely be returned. In this respect, it has the major characteristic of being low-risk compared to investments that involve risk, such as stocks or investment trusts. This is a great source of peace of mind, especially for those who are anxious about saving money itself or those who want to securely protect their principal.

4. You can choose the timing for interest to increase

With a fixed deposit, you can freely choose the deposit period, so you can maximize interest according to your lifestyle. For example, if you do not plan to use the money for a long time, you can choose a long-term fixed deposit to enjoy a higher interest rate. On the other hand, if you have a specific need for money in the short term, you can choose a short-term fixed deposit. In this way, fixed deposits can be used flexibly according to your purpose.

5. You can utilize the compound interest effect

Fixed deposits work with "compound interest," which allows you to add the interest earned during the deposit period back to the principal. For example, if you make a 1-year fixed deposit, after one year, interest is added to the principal, and that interest is also incorporated into the principal for the next period. By utilizing this compound interest effect, interest increases over time, and there is a possibility that your savings will grow at an accelerating rate.

3. The appeal of fixed deposits

It is important to save money while managing your household budget. Fixed deposits have benefits for increasing assets while firmly protecting your household finances.

• Enhancing household stability
  By putting money into a fixed deposit, you can separately prepare money to use in case of sudden expenses. Because fixed deposits have restrictions on withdrawals, they have the effect of preventing overspending. For example, you can secure money for travel or family celebrations, and save according to your purpose without spending it wastefully.

• Easier to set long-term goals
  When saving for children's education funds or funds for retirement, fixed deposits make it easier to set long-term plans, such as "preparing the necessary amount in X years." Since savings increase over time, it is easier to clarify the amount needed to achieve your goals, which is useful for managing your household finances.

4. Summary

Time deposits offer higher interest rates compared to regular savings accounts and are an effective means for growing your money systematically. They are extremely useful for increasing your savings while managing your household budget and keeping risks low. By understanding the money you use in your household and choosing time deposits that allow you to withdraw funds when needed, you can gain peace of mind for the future. When you find high-interest time deposits at online banks or similar institutions, they are worth considering.

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