As New Zealand’s financial landscape continues to shift in 2026, many Kiwis are re-evaluating their savings strategies. One question that frequently arises is: Are term deposits still worth it in New Zealand? With changing interest rates, inflation pressures, and an increasing array of investment options available, it’s understandable that investors are weighing the pros and cons more carefully than ever before.

Term deposits are offered by both banks and non bank deposit takers, which are licensed and regulated by the Reserve Bank of New Zealand (RBNZ). In this blog, we’ll explore the current state of term deposits, examine term deposit rates in NZ, and compare them to alternative investment choices.

What Is a Term Deposit?

A term deposit is a type of investment where you deposit a lump sum of money with a bank or financial institution for a fixed term such as 30 days to five years. In exchange, you earn a fixed interest rate for the duration of the term.

The funds are locked in for the duration of the term, meaning you can’t access the money without facing early withdrawal penalties. To open a term deposit, you typically need to meet a minimum investment amount, which varies by institution, and you can open a term deposit either online or at a branch by providing the necessary documentation.

Pros of Term Deposits in 2026

Capital Safety and Certainty

One of the biggest advantages of term deposits is their safety. Your principal is protected, and returns are guaranteed (provided the bank doesn’t default, which is highly unlikely in New Zealand’s regulated banking environment). For risk-averse investors, especially retirees or those nearing major financial milestones, this level of certainty is attractive.

Fixed Interest Rates

Unlike savings accounts, term deposits typically offer fixed interest rates. In a volatile market, this can be reassuring. Many term deposits also let you choose your interest payment frequency such as monthly, quarterly, or at maturity so you can select the option that best fits your needs. Locking in a decent rate today means you’re protected if rates fall in the future.

Low Effort Investment

Term deposits require very little management. Many providers allow you to manage your term deposit and change maturity instructions via internet banking. Opening a term deposit can often be done quickly by completing an online form. Once your money is deposited, it simply earns interest until maturity. There are no ongoing fees, and you don’t need to monitor markets or worry about daily fluctuations.

Good for Short- to Medium-Term Goals

If you’re saving for a home deposit, a holiday, or tuition fees, term deposits can be a smart way to grow your money without exposing it to the risks of the stock market. Term deposits can be set for fixed periods of up to five years, allowing you to choose a term that matches your savings goal.

You can also choose how often you receive interest payments monthly, quarterly, or six monthly depending on your preference. At maturity, your interest or principal can be paid directly into your nominated bank account, making it easy to access your funds.

Cons of Term Deposits in 2026

Relatively Low Returns

In 2026, while term deposit rates in NZ have improved slightly from the post-COVID lows, they still lag behind returns offered by other investment vehicles like shares, managed funds, or even some high-interest savings accounts. Interest rates are subject to change and may be updated at any time.

For long-term wealth building, term deposits may underperform. The above rates are subject to change without notice and may vary depending on the provider.

Locked-In Funds

The trade-off for fixed returns is reduced flexibility. Some term deposits require you to give notice, such as 60 days, before you can access your money. Accessing your money early may result in early withdrawal fees or reduced interest. If you need to access your money early, consider whether a more flexible savings product is appropriate. In a high inflation environment, this can erode the real value of your savings.

Inflation Risk

One of the biggest risks in 2026 is inflation outpacing the interest earned on term deposits. If inflation is running at 4% and your term deposit yields 5%, your real return is only 1%. The interest you earn is also subject to your personal tax rate, which affects the amount you actually receive. You may need to pay tax on your interest earnings, and the effective rate is what you receive after tax is deducted. If inflation rises higher, your purchasing power may actually decrease over time.

Added reassurance: Depositor Compensation Scheme (DCS)

While term deposits come with some risks and limitations, it’s important to note that your deposits are protected by the Depositor Compensation Scheme (DCS). This government-backed initiative guarantees deposits up to $100,000 per depositor, per institution, providing added security for your funds.

Comparing Term Deposits with Other Investment Options

Managed Funds and Shares

Investors can choose to invest in managed funds, shares, or term deposits depending on their preferences. Over the long term, managed funds and equities tend to outperform term deposits due to higher potential returns. However, they come with greater volatility and the possibility of capital loss. Investors with a longer time horizon and higher risk tolerance may find these options more rewarding.

High-Interest Online Savings Accounts

Some online banks in NZ now offer high-interest savings account options as an alternative to term deposits without locking your money away. These accounts provide flexibility, daily access, and easy account management, although interest rates can change at any time.

Government Bonds

Government bonds offer a middle ground between term deposits and shares. They provide steady returns with relatively low risk, although they may still be affected by interest rate changes and inflation.

When Term Deposits Make Sense

Despite some of the drawbacks, term deposits can still be a valuable part of a diversified financial strategy in 2026. Here are a few scenarios where they may be particularly suitable:

• Retirees looking for capital preservation and predictable income.
• First home buyers are saving for a deposit within the next 1–2 years.
• Investors who want to balance higher-risk investments with some stable, fixed-return assets.
• Business owners seeking a short-term, low-risk place to hold funds earmarked for future expenses.

Interest and principal from term deposits are typically paid directly into your nominated bank account, making it easy to access your funds or reinvest as needed.

Tips for Getting the Best Out of Term Deposits

1. Compare Rates Regularly – Don’t settle for the first offer. Use comparison sites or speak to a financial adviser to find the best term deposit rates in NZ.
2. Consider Laddering – Spread your money across multiple term lengths to provide more regular access to funds and reduce the risk of locking in at a low rate.
3. Watch the Inflation Rate – Ensure your interest earnings outpace inflation, or you’re effectively losing money.
4. Read the Fine Print – Some “special rates” may come with restrictions or require you to bank with the provider.

Note: Interest rates and investment terms are subject to change. If you have questions about large deposits, special rates, or need more details about our loans, please contact us for more information.

Final Thoughts: Are Term Deposits Still Worth It?

The answer depends on your individual financial goals and investment timeline.

If you’re looking for a safe, low-maintenance investment with guaranteed returns, term deposits remain a solid option. But for those seeking higher growth or more flexibility, alternatives like managed funds, shares, or high-interest savings accounts may be more suitable.