Is a term deposit the best choice for me?


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I am a 37-year-old single mum with two young teenagers. I am a full-time student on $40,000. I have no debt, with $8000 in savings in a term deposit and about $20,000 in super.

Currently I put away $20 each for my kids in a savings account for them and between $50 to $100 for myself.

When the term deposit matures I place the interest and what I save together into another term deposit.

Is this the best option for me? I would like to make myself financially stable for now and in retirement and would like to travel.

Paul: I'm really impressed that as a single mum who's studying full time you're able to avoid debt and put away some savings. It shows commitment to sticking to a financial plan and sets a good example for your kids to follow.

Considering you have two kids at home and you're studying full time, a conservative approach towards finance makes sense for the time being. This means sticking to high-interest savings accounts or term deposits which can give you access to your savings at short notice if need be.

Under our tax system, if kids under 18 earn more than around $416 a year in unearned income such as interest, they get taxed very heavily. As such, any savings you put aside in their name over around $10,000 at current interest rates will be taxed heavily. This doesn't look like a problem for now but it's something to keep in mind.

Once you finish your degree, start working again and have a larger income coming in, it might be a good chance to rethink your strategy. At that point, you could start thinking about saving up a deposit to buy a home, as well as starting to build up your super.

At 37 you have plenty of time to create wealth. Right now I'd stick to your studies and your current savings plan.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.