What are bank deposits?

A bank deposit, or in other words a bank deposit, is a product that can be found in the offer of every bank. The whole mechanism of its operation is to deposit a certain sum of money for a fixed period of time, in exchange for receiving interest. During the term of the deposit, it is not possible to dispose of the funds on your own. They will be credited to the main account (along with interest) as soon as the contract ends. Submitting an instruction to withdraw funds early may result in the loss of the right to interest.

Thanks to the money deposited, banks build their liquidity in terms of customer service – they allocate it to loans and trade it on the currency markets. You can learn how the money entrusted to the bank is used in numerous online training courses or on educational platforms.

Interest on deposits is not the same in every bank, so you should always look for an offer with the highest interest rate. It is up to him that the expected earnings depend. It should also be remembered that the interest rate on the deposit is always expressed in relation to the annual basis, and the earned funds are always reduced by the applicable tax. The Webinar Unvierse explains exactly how to calculate your projected return on a deposit.

How to invest in bank deposits?

Deposits are a very popular way to save money. It is a form of investment that does not require any maintenance. The customer simply deposits their funds into the bank after signing the contract. Deposits may have different terms and duration of the agreement. They can be divided into two main groups at the same time:

• Term deposits - have a specific duration, for example, 3, 6 or 12 months. During the term of the deposit, it is not possible to withdraw the invested funds at any time, and interest is usually paid at the very end of the investment, along with the return of the principal;

• Savings deposits - you can withdraw funds at any time and without incurring any costs. The interest rate on this type of deposits is much lower than on term deposits, but this form is more flexible for the client;
• Renewable deposits - this is a deposit that is extended by the bank automatically after the end of the specified period. Therefore, it gives you the opportunity to further multiply your capital;
• Annuity deposit - this is a long-term deposit. The contract is usually concluded for a period of one to 3 years. Interest is not paid by the bank at the end of the contract, but at regular intervals, for example quarterly. This option tends to have a higher interest rate, but requires a lot of capital;
• Foreign currency deposit - it is a deposit of your savings in a foreign currency. The profit here will depend not only on the interest rate itself, but also on the changing exchange rate. If, for example, the value of the dollar or euro increases, the investor will gain additional profit.

Risk assessment

From the bank's point of view, a deposit is the cheapest way to raise funds for running a business. Thanks to the money deposited by clients, they can turn over their capital and multiply it. In exchange for making their funds available, the client receives a fixed profit, and the risk of such an investment is practically zero. Educational platforms that offer online training clearly emphasize that a deposit is one of the safest forms of building one's capital.

The Bank Guarantee Fund (BFG) takes care of the security of funds accumulated on deposits. it is an institution that has been operating since 1994, and all deposits accumulated in banks in Polish are subject to its protection. If, in the worst-case scenario, the bank goes bankrupt or declares bankruptcy, the fund takes on the role of an insurer and guarantees the return of the funds entrusted to the bank to customers.

An investor who chooses a bank deposit does not have to worry about market fluctuations or dynamically changing prices, as is the case, for example, with the stock market. A deposit is therefore a safe way to multiply funds, but with the assumption that this profit will not be too large. Freezing money for a certain period of time therefore excludes the investor from the possibility of using the funds in a different, perhaps more profitable way. Pros and cons of bank deposits A bank deposit is one of the safest ways to save. It involves virtually no risk of capital loss. This is a great option for freezing your funds for the long term to make a profit and at the same time protect your money from inflation. Depending on the bank, they have different interest rates, but they are always higher than the interest rates on savings accounts or regular accounts.

The biggest disadvantage of deposits is the relatively low rate of return compared to other and at the same time more risky forms of investment. Unfortunately, the best offers in banks are usually available once, so if you want to use the deposit again, you usually have to take into account worse conditions in the form of a lower interest rate.

Although a bank deposit is not one of those forms of investment that bring a high rate of return, especially in the short term, it is still a better form of saving than keeping money in a regular account. In addition, the deposit turns out to be helpful in effectively separating the money intended for everyday expenses from those intended for savings.

Before choosing the right deposit for you, you should think about your own expectations and the amount you are willing to deposit. The longer the investment period, the higher the nominal returns. The interest rate on deposits is expressed on an annual basis, so leaving funds in a bank deposit for a shorter period of time will not bring very noticeable benefits in the form of building a financial cushion.