Term deposits are a low-risk way to invest your money (compared to, for example, shares) that deliver a fixed rate of interest. Most term deposit takers allow you to choose when you receive interest, such as monthly or at maturity. Generally, the more frequently interest is paid, the lower the rate of return.
Interest rates on term deposits vary between financial institutions. But they all rise and fall in step with changes to the Official Cash Rate. At the moment, that trajectory is down. But, currently, you can still find one-year fixed-term interest rates above 5%.
It’s also worth noting that the Reserve Bank of New Zealand’s Depositor Compensation Scheme (DCS) comes into effect from July 1. The DCS provides insurance for deposits up to $100,000 per deposit taker, when the money is held in accounts that are covered by the DCS legislation. This means that there will be less risk involved with chasing higher term-deposit returns with non-bank deposit takers.
How much interest can $1 million earn in a year?
This depends on the interest rate and when the interest is paid. For this article, we’ve considered $1 million deposited in a one-year term deposit with interest paid at maturity.
At time of writing, the highest one-year term deposit rate on Canstar’s database is 5.50%, from General Finance. So with a deposit of $1 million, you could earn interest of $55,000 paid at maturity (calculated via Canstar’s Term Deposit Calculator). But, of course, you would have to pay tax on those returns.
Below we’ve listed how much interest you could earn in a year from $1 million invested in each of the five highest one-year term deposit accounts on Canstar’s database. To view a wider range of term deposit accounts, use Canstar’s Term Deposit Comparison Tool.
The results based on an investment of $1m for 12 months.
| 12-month term deposit rate | Interest earned | |
 |
5.50% | $55,000 |
 |
5.35% | $53,500 |
 |
4.20% | $42,000 |
 |
4.15% | $41,500 |
 |
4.10% | $41,000 |
About the author of this page
Bruce Pitchers is Canstar NZ’s Content Manager. An experienced finance reporter, he has three decades’ experience as a journalist and has worked for major media companies in Australia, the UK and NZ, including ACP, Are Media, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. As a freelancer, he has worked for The Australian Financial Review, the NZ Financial Markets Authority and major banks and investment companies on both sides of the Tasman.
In his role at Canstar, he has been a regular commentator in the NZ media, including on the Driven, Stuff and One Roof websites, the NZ Herald, Radio NZ, and Newstalk ZB.
Away from Canstar, Bruce creates puzzles for magazines and newspapers, including Woman’s Day and New Idea. He is also the co-author of the murder-mystery book 5 Minute Murder.
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