Your investment horizon is a crucial factor in whether or not you’ll be able to reach your savings goals. Your horizon can vary from few days - for example, on your checking account - all the way up to decades - for example, for a pension fund. The structure of the financial product can depend on it (e.g. fixed term deposit vs. saving account) and the various pricing elements, beside the interest rate served, will differently impact your final net earnings (e.g. opening cost, loyalty bonus, etc.).
If you are saving for a short term (opportunistic approach to benefit from a promo offer or saving product to invest your short term liquidities) you should consider a savings account. This type of account often allows you to add or withdraw money at any time, without penalties.
However, most savings accounts have lower return rates than term deposits or savings account with prior notice. Here you can consider savings accounts with bonus rates. The bonus part means that the rate of interest is inflated by a temporary bonus. For example, an account may have a rate of 0.7% but have an additional bonus of 0.5% for the first 6 months. Even if this bonus will not make a lot of difference for a long period, it can be a nice plus for a short-term saving horizon.
Finally, you can consider short-term deposits, which are accounts from which you cannot add or withdraw money until term without penalty. Some offer higher rates on short periods: 1, 3 or 6 months. The advantage? There is no surprise: the rate is fixed at the opening of your account and will not change until the end.
If you are planning a bit more ahead, for 1 to 3 years, you will not have the same needs.
For a medium term financial horizon, a savings account is a good choice, especially considering that you will be able to profit from fidelity premiums. A fidelity premium is offered for clients with a mid- or long-term investment profile. Criteria differ from bank to bank but can be a regularly growing end of month balance, the absence of withdrawal over a given period, or many other things. For example, let us consider a savings account with a rate of 0.7%. This account may include a fidelity premium of 0.5% delivered after a 1 year period. Thus, if you leave your money for more than a year your interest rate becomes 1.2%. But be careful, these attractive rates are often available only provided that you don’t withdraw money during the year, so make sure you won’t need a little help at some point to end the month.
If you are saving for your children to be able to afford college or for your retirement, you may be sure you will not need access to your money for five years or more. This is when you should consider term deposits, which will offer the highest rates for longer saving horizons.
However, you should not forget that most of the time, this account will often be totally blocked, which means you will not be able to withdraw money at all unless you pay a penalty, which can represent the entire interest accrued. This is why you need to be very sure you will not need access to this money before term.