In plain words
A fixed-term deposit or locked plan pays more because the saver gives up access; money needed before the end date, such as an emergency cushion, loses that extra to the early-exit penalty.
Two worked examples
The common mistake
The mistake: Locking away money that may be needed soon because the locked rate is higher, then paying a penalty to get it back.
What’s true: The extra interest is the price of your patience — breaking the lock early usually hands it back.
Deposit insurance has a limit
Many countries insure bank deposits up to a limit per person, per bank. Money above the limit — or in a product that is not a bank deposit — is not covered if the firm fails. The cover follows the bank, not you: the same limit applies at each bank, and only to deposits.
Where you’ll meet it
- 3–6 months, liquid, untouchedThe fund is not for returns — it exists so a bad month never touches your future money.
- Cash loses to inflationPrices climbing while cash sits still is a pay cut nobody announces.
- The gotcha clause hides on page 3The headline is marketing; the clause is the contract — the expensive sentence is the quiet one.
Related terms
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