How to open a time deposit account

If you’ve successfully built your emergency fund, secured life protection plans, and have started investing, you deserve a tap on the back for being financially responsible with your hard-earned money. However, along with your savings and 13th-month pay, you realize that you still have money to spare. 💰

Before you hop on your favorite shopping app and spend that extra cash, you may want to explore another investment vehicle that can help your money grow💸 

As your financial buddy, we recommend TIME DEPOSITS. But what are time deposits? More importantly: How can they help you on your journey to financial freedom? 🤔 

What is a time deposit 

A time deposit is an “interest-bearing bank account that has a pre-set date of maturity.” It is expected that the money must remain in the account for the predetermined period of time in order to earn the stated interest rate. This type of investment fits individuals who want the best interest rates available without exposing the amount they put into a high level of risk.

How does a time deposit work

Your money is expected to stay in the bank for a certain amount of time. Banks shall then use your funds to reinvest or lend them to other individuals for higher profits. Once the entire lock-in period is over, your money should have grown due to interest. 

This type of investment is fairly easy and basic but a word of caution: If an emergency comes up and you’d be needing your money, the bank will allow you to conduct an early withdrawal but with a penalty fee. 

The pre-termination penalty usually equates to “75% of the accrued interest  interest rate from the date of the account creation up to the date of the pre-termination.” This implies that you’d be losing your hard-earned money so better be sure that you are in a good financial position before pursuing time deposits.

How to open a time deposit account

After doing your research on which bank you’d like to open a time deposit account with, you only need to prepare the documents and requirements they will be requiring.  The minimum placement (which varies per bank) starts at Php 1,000.

Once you’ve determined how much money you want to safekeep, decide the timeframe you’d like to lock-in your deposit. Most financial institutions in the country have a lock-in period of 30 days to 5 years. 

It’s as simple as that!

How much can you earn

Here’s a sample illustration on projected earnings if you put in Php 100,000 with a lock-in period of one year and ten years (should you wish to extend the duration).

Reference: https://grit.ph/time-deposit/ 

Always remember: You have to assess your financial capability first before opening a time-deposit account. 

Make sure that you have a strong financial foundation before diving in: emergency fund intact, health and life insurance plan secured, and easy-to-liquidate investments ready. 

Avoid being penalized for prematurely withdrawing from your account, future-proof your money, and get closer to your financial goals with the help of this investment option 💖

SAVii offers FREE Financial Education Webinars to the employees of our partner companies. If you’re curious to know more about our products and services, you may visit our website, www.savii.io.