Investment: Why the time deposit account is hardly worthwhile | EUROtoday

Fixed deposits are thought of a protected strategy to make saves wise. However, rates of interest are so low for a lot of merchandise that traders make losses. Is mounted deposits nonetheless worthwhile?

Fixed deposits are thought of a safe strategy to make investments cash and profit from curiosity as an alternative of solely having the financial savings raid on the checking account. It subsequently appears enticing for danger -free traders – an funding with an outlined time period, for which the shopper and monetary establishment agree on a agency curiosity. So you additionally know when the cash can be paid out once more and might anticipate the return recorded within the contract.

And with that you would be able to even calculate: Because in Europe there’s the so -called deposit insurance coverage, with which property are secured as much as an altitude of 100,000 euros. In the occasion of compensation – so your individual financial institution ought to go bankrupt – the financial savings together with curiosity is paid out. “In addition, of course, there can be any loss of payment,” emphasizes Olaf Stotz, knowledgeable in funding and retirement provision on the Frankfurt School of Finance and Management within the new ARD-Finance format 50k On YouTube: “That means if I insert more than 100,000 euros in money to the fixed -term deposit account and the bank goes bankrupt, then it may well be that I get less than my 100,000 euros back.”

Money by means of Deposit safety protected

That is why the knowledgeable emphasizes that the mounted deposit must be break up, particularly in bigger techniques, to be able to profit from the deposit insurance coverage. Consumer advocates additionally advise you to concentrate to the place a financial institution has its headquarters. Because if a financial institution is broke and the nation ensures securing the deposits, it should actually be financially capable of save this financial institution. That is why many shopper advocates take the creditworthiness of the person international locations wherein the banks sit, take an in depth have a look at once more.

Incidentally, all international locations are handled equally inside Europe, explains Stotz: “The European deposit insurance for 100,000 euros applies regardless of whether this is a Greek, French, Irish or Deutsche Bank.” However, he emphasizes that there can nonetheless be variations: “There are parts of the German banking system that have additional security systems, such as the Volks and Raiffeisen banks or the savings banks.”

Low -risk funding

Basically, the system is low in a set deposit account. The solely essential factor is that in distinction to the in a single day cash, the financial savings, which is situated within the mounted deposit account, shouldn’t be obtainable each day – you get your cash. If you need to open a time deposit account, it is best to make it clear that the cash shouldn’t be obtainable within the agreed time period and that you just can not entry it for 2, three or 5 years.

If you make investments your cash over an extended time frame, you shouldn’t solely take note of safety – but in addition to guard your cash from inflation. It shouldn’t be about huge returns, however in regards to the cash that’s put to the facet doesn’t lose worth. “At the moment we are approximately from the fixed deposit interest at the level of inflation. That means you lose or win nothing as an investor – it is a zero -sum game,” explains Stotz in ARD monetary format 50k.

Note the time period

The time period of the account and thus the time period of the curiosity additionally performs a job: if you’re in a interval, for instance, wherein the European Central Bank relies on the important thing rates of interest – on which the curiosity that you just get in your mounted deposit account – is growing, then quick phrases are a bonus. Between July 2022 and September 2023, the important thing rates of interest rose from zero % to 4.5 % – within the time you might at all times safe increased rates of interest with quick phrases.

If, then again, it’s foreseeable that rates of interest drop once more, then longer phrases make extra sense. Since September 2023, the central bankers have lately lowered the important thing rate of interest from 4.5 % to 2.65 % (as of March 2025). Many observers had already anticipated that curiosity would sink once more – and subsequently many banks lowered rates of interest for brand new contracts earlier than the ECB’s determination. Since additional reductions are anticipated, mounted deposits are in all probability nonetheless simple.

Fixed deposit is “Money extermination machine”

The following calculation exhibits why this may be problematic: at 10,000 euros, which is created for 5 years with an rate of interest of two.4 % per 12 months, the pure curiosity earnings with out compound curiosity impact is 1,900 euros. At this level, nevertheless, it must be talked about: Taxes are incurred if you come by means of the allowance. If you now put the entire thing in relation to inflation, then the true rate of interest, i.e. the yield, is even within the crimson.

“And then the fixed deposit account quickly becomes a money destruction machine or better to the purchasing power destruction machine,” stated Olaf Stotz. “Although you always have a little more money in your pocket every year, you can buy less and less from it. And the problem has been very extreme in the past 15 years: The compensation for inflation through time deposit did not take place anymore.”

The knowledgeable additionally emphasizes that some banks provide good circumstances with excessive rates of interest, particularly for brand new clients. However, you could usually have had no account with the financial institution in a sure time frame or solely deposits from different banks can be paid notably effectively. So it is best to at all times examine effectively.

Better placed on with the curiosity staircase

One strategy to make a cash within the mounted deposit account as profitably as potential is the curiosity staircase. For this goal, the full quantity you need to placed on is split into, for instance, three quantities of equally giant quantities. For every quantity, particular person contracts are concluded with run instances staggered yearly, i.e. for one, two and three years. In this manner, a set price is due yearly, for which a brand new mounted deposit contract is then concluded with a 3 -year time period. With this technique you keep versatile and on the identical time profit from rising rates of interest.

However, this technique doesn’t at all times work equally effectively: “At the moment, the interest staircase is rather flat because the differences between the individual terms are only low,” emphasizes Stotz in ARD finance format 50k. In the case of falling curiosity, as is presently the case, one can – as an alternative of with a number of mounted deposits – additionally create with a mixture of a every day and stuck deposit account. In this manner, it’s simpler to modify off in a altering scenario and still have a bigger a part of the property.

Alternative: runtime-ETF

An different to the traditional mounted deposit account can also be working time ETFs. These are shares or bonds that traders can purchase and promote on the inventory change at any time. A time period ETF bundles bonds of firms that each one run equally lengthy, for instance three, 5 or ten years. As an investor, a bunch of firms then borrow cash over a set time frame, will get curiosity yearly and after the time has expired. Both length and rate of interest are identified when shopping for the time period. An ETF on authorities bonds can also be potential.

Olaf Stotz emphasizes that such merchandise primarily have two benefits: “The first advantage: You can access your money at any time in a money market ETF, buy or sell it all the time. The second advantage is that you benefit from a good interest rate.” The drawback is: there isn’t any deposit insurance coverage right here, motion on the inventory change is at all times related to a danger.