Term Deposits vs Investing: What Kiwis Are Getting Wrong in 2026
Term deposits feel safe.
You know what you’re getting, there’s no volatility, and your balance doesn’t jump around.
But here’s the part many Kiwis are missing in 2026:
Safe doesn’t always mean smart.
What term deposits are really delivering
On the surface, a 4–5% term deposit rate looks reasonable.
But once you factor in:
Tax (especially if you’re on a higher PIR or marginal rate)
Inflation quietly eating away in the background
…the real return is often much lower than people think.
In some cases, you’re barely staying ahead. In others, you’re going backwards without realising it.
Why “no risk” can still cost you
Term deposits don’t fluctuate—but they do carry a different kind of risk:
Inflation risk: Your money loses purchasing power over time
Opportunity cost: Missing out on long-term growth
Reinvestment risk: Future rates may be lower when you roll over
It’s not about term deposits being “bad”—it’s about understanding what they’re actually doing (and not doing).
Where investing fits
Investing—whether through managed funds, shares, or diversified portfolios—introduces short-term ups and downs.
But over time, it’s designed to:
Grow ahead of inflation
Build real wealth
Provide flexibility and options later on
That’s the trade-off:
Short-term movement for long-term progress.
When term deposits do make sense
They absolutely have a place:
Emergency funds
Short-term goals (next 1–3 years)
Capital you can’t afford to see fluctuate
Part of a diversified strategy
The issue isn’t using term deposits.
It’s using them for everything.
A smarter approach: not either/or
Most people don’t need to choose between term deposits or investing.
They need the right mix.
Cash for stability and access
Investments for growth and future income
That balance is where good financial planning lives.
Simple takeaway:
If all your money is sitting in term deposits, it might feel safe—but it may not be working very hard for you.
If you want a second opinion on whether your current setup is actually moving you forward, we are always happy to take a look.
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.
