Are Term Deposits Still Worth It in 2026?
When markets feel uncertain, many investors naturally gravitate towards the safety of term deposits.
But are term deposits still a good investment option in today's environment?
The answer is yes—but with some important caveats.
Why Investors Love Term Deposits
Term deposits offer certainty.
You know:
How much you're investing
The interest rate you'll receive
When your money will become available
For investors who value stability and predictability, this can provide significant peace of mind.
The Trade-Off: Lower Growth Potential
The downside of term deposits is that certainty often comes at the expense of growth.
Historically, growth assets such as shares have delivered higher long-term returns than cash investments. While they can fluctuate in value, they have also been one of the most effective ways of building wealth over time.
Term deposits, on the other hand, are designed to preserve capital rather than grow it substantially.
Don't Forget About Inflation
One of the biggest risks to long-term investors isn't market volatility—it's inflation.
If your term deposit earns 4% after tax considerations while the cost of living increases by a similar amount, your purchasing power may not actually improve.
In simple terms, your money may feel safe, but it may not be working as hard as it could.
When Term Deposits Make Sense
Term deposits can play an important role when:
You're saving for a short-term goal.
You need access to funds within the next one to three years.
You want a cash reserve for emergencies.
You're drawing income in retirement and need stability.
Market volatility is causing stress and sleepless nights.
It's About Balance
The decision doesn't have to be all or nothing.
Many successful investment portfolios include a mix of:
Cash and term deposits for security,
Income assets for stability, and
Growth assets for long-term wealth creation.
The right mix depends on your goals, timeframes and tolerance for market ups and downs.
The Bottom Line
Term deposits absolutely still have a place in an investment portfolio.
The key is understanding what role they're playing.
If your objective is capital preservation and short-term certainty, they can be an excellent option.
But if your goal is growing wealth over the long term, relying solely on term deposits could mean missing opportunities for your money to keep pace with inflation and future needs.
Investing isn't about choosing the "best" investment. It's about building a strategy that gives each dollar a purpose—and aligns with the life you're trying to create.
Legaseed NZ Ltd (FSP1005404) holds a licence issued by the Financial Markets Authority and provides financial advice in relation to financial & retirement planning, investments, KiwiSaver and personal risk insurance. Our disclosure information can be found on our website www.legaseed.co.nz, or is available on request and free of charge.
