Page last updated: 04 March 2020

Cash investments

Cash investments are relatively safe because you’re promised a fixed interest rate. But the returns you get through interest rates tend to be low, so they’re not always the best option – particularly if you’re saving for retirement.

Cash investments include savings accounts and term deposits with a bank, credit union or building society. You can also invest cash through a managed fund (this includes KiwiSaver) which pools together money from individuals for investments, managed by a fund manager.


Understanding returns

Savings accounts and term deposits typically guarantee a set level of interest each year. Most basic savings accounts allow you to withdraw your money whenever you want.

A term deposit offers a higher interest rate but you may have to forgo your interest or get lower interest if you withdraw your money before the term finishes. Term deposits can range from three months to five years.



We don’t regulate savings accounts or term deposits but we do regulate managed fund providers.  While generally considered a safer form of investment, there are still some risks to consider.

Your money might not grow as fast as the cost of living

Cash investments are considered low-risk but this usually means they offer a low-interest rate. If you have a long-term goal, such as saving towards your retirement, the risk is that your money won’t grow as fast as the cost of living. This is known as inflation risk. If inflation increases more than the returns on your investment, your money will have less buying power when you need it.

There’s no guarantee on bank investments

Putting your money with banks is considered one of the safest forms of investment in New Zealand, but there’s no guarantee the banks won’t fail. A good rule is to spread your money across different cash investments.


Providers’ fees vary and depend on the accounts you choose. Generally, accounts offering higher interest also tend to have conditions attached, such as maintaining a minimum deposit in your account.

There may also be penalties for withdrawing money early – such as a break fee, or reduced interest on early withdrawals.

What to do before you invest

Shop around

Check carefully the details about penalties for withdrawing money from the account or if there are high fees for breaking a term deposit.  Because fees are paid out of your investment, differences in fees and charges can have a big impact over the long term. It’s always a good idea to shop around for the lowest fees.

Consider the financial strength of the organisation you’re investing with

The Reserve Bank publishes the Bank Financial Strength Dashboard – an interactive disclosure tool that can help you understand and compare banks’ businesses and risks.

Consider how cash will help you achieve your investing goals

Think about whether the security of a low risk investment is worth the lower return you’ll get from your cash investment.

Holding other types of investments such as bonds, property or shares can help reduce the risk of your money’s value being eroded by inflation. If you’re saving for retirement, contributing regularly to KiwiSaver is an easy way to spread your investments.

Managing your investments

Keep an eye on the interest rate being offered for other cash investments. If the rate you’re being paid looks low compared with similar rival providers, consider moving your money.

If your term deposits are set to an automatic roll-over, keep a close eye on the dates so you have time to check for better rates before the roll-over occurs. And before you move your money, it’s worth asking your own provider whether they can match the rival rate. They often can.