“Term deposits are currently really generous,” says Canstar NZ general manager Jose George. “The average five-year term deposit rate was last this high in 2014, while average one, two, three and four-year rates are at their highest in at least 10 years.”
That means it makes sense to shop around for better rates if you have cash savings. Currently, it’s possible to get in excess of 6 per cent interest on 12-month term deposits with New Zealand banks and building societies. Or if you need your money on call, then Heartland Bank is offering 4.6 per cent and Kiwibank 4.5 per cent. These are both portfolio investment entity (Pie) accounts, which means your after-tax returns are even higher than the published rate if you’re a 30 per cent or 33 per cent taxpayer.
Canstar.co.nz, Interest.co.nz, Depositrates.co.nz and Moneyhub.co.nz all offer interest rate comparisons. The best is the one you find easiest to navigate.
But a word of warning. Be very wary indeed of using Google searches for interest rates. Some New Zealanders who Googled looking for the best rates have inadvertently clicked on scam websites and ended up losing large sums of money.
At first glance, scam websites look exactly like the real thing. So even if you find a rate online you like the look of, don’t click on it. Instead, type in the bank’s website, such as Westpac.co.nz or BNZ.co.nz, and navigate your way around to find the deal directly.
Getting the very best rates requires a lot of shopping around and switching because they change regularly. Be aware that some of the best rates come from companies with lower credit ratings, which increases risk. There is a balance to be had.
I tend to be happy if I’m getting a high-ish rate without having to constantly switch between providers or take too much risk. I tend to stick with one main bank and then a “significant other” bank to get the higher rates.
If you’re investing a large amount of money that you’re dependent on now, or will be in the future, then always make sure it’s spread across more than one bank/provider. It’s unlikely one of our High Street banks would fail. But never say never when it comes to financial services.
When shopping around, you’ll come across banks you may never have heard of. Names like Rabobank, Kookmin and ICBC are actually fairly large international banks that offer term deposits here. Other names such as Liberty and Xceda Finance are finance companies, which may be riskier.
If it’s not a name you know well, check their credit ratings. Interest.co.nz shows providers’ credit ratings. But unlike university, a “B” isn’t a good rating. You’re looking for an A, AA, or AAA, to feel secure. The more As, the better.
Some people can’t save. But a lot could if they cut back on unnecessary spending. It’s week three of Money Month this coming week, and the Retirement Commission and its website Sorted.org.nz have three key messages for those people who know they should be saving, or doing better with their savings:
- If you are looking to cut back, choose those extra expenses that don’t bring you joy. You will be spending less, without feeling deprived.
- Set up automatic payments for your savings. Your money grows in the background - when it is out of sight, it is out of mind.
- Saving money isn’t just for nice things. It can be a safety net for anything unexpected.
Finally, ASB general manager of business, transformation and customer outcomes Roz Clarke says developing a savings habit is way more important than getting a pay rise. “Somebody’s ability to create a savings habit is five times more impactful on their financial wellbeing [than] an increase in income. That’s the power of a savings habit.”
