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Short-term deposits for saving money

Deposits in banks are a convenient way to receive additional income and protect your savings from depreciation, but at the same time, it means losing access to your own funds during the term of the contract. To manage your money freely, you can simply keep it on a bank card, but in this case, you will either not receive interest on the balances at all, or their amount will be minimal. Choosing between benefit and flexibility, Ukrainians found a golden mean for themselves - short-term deposits.


What is a short-term deposit

Short-term deposits are time deposits in banks with a term of less than 12 months. Usually, a short-term deposit can be placed for 1, 3, 6 or 9 months, but the most popular today are bank deposits for 3 months.

The minimum term for which you can place a short deposit is 1 month, but such a deposit provides a significantly lower yield than a 3-month deposit. This is due to the National Bank's accounting policy and provisioning regulations, which make ultra-short deposits unprofitable.

Short-term deposits are mostly made in hryvnias, since most people receive income and spend it in the national currency, and it is impractical to convert hryvnias into dollars or euros in order to place them at 0.01-1% per annum on a foreign currency deposit. The exception is convertible deposits, when you buy currency at the NBU exchange rate with a mandatory deposit for a period of 3 months or more.


Short-term high-interest deposits

Traditionally, the profitability of deposits depended on their duration: the longer the term, the higher the rate. However, recently the situation has significantly changed and currently banks offer the most attractive deposit rates specifically for short deposits for 3 months. This is related to the turbulence of the situation, when the situation can radically change in a fairly short period of time, so neither banks are ready to fix high rates for 1-2 years, nor the population is ready to freeze their money for such a period.


Deposit rates for three months

Average interest rates on deposits in the twenty largest Ukrainian banks by the volume of household funds (UIRD index) as of September 1, 2023, depending on the term:

  • 14.06% per annum for 3 months
  • 14.71% per annum for 6 months
  • 14.55% per annum for 12 months

As you can see, the interest rates for different terms in the top twenty banks practically leveled off at 14.5%. And what is the situation in the market as a whole?

The maximum deposit rates in the banking system as a whole in the seven most generous financial institutions:

  • 19-20.5% per annum for 3 months
  • 18-19% per annum for 6 months
  • 17.5-18.5% per annum for 12 months

As you can see, today it is really possible to place deposits for three months at a high interest rate and the rates for such deposits are really maximum - 1-1.5% higher than for deposits for 6 or 12 months.


What to pay attention to when making a short deposit

The short term of the deposit makes its placement practically risk-free. With this in mind, it makes sense to really look for the highest rate available in the market and not be so picky about choosing a banking institution. It is very unlikely that the banking institution will have problems in such a short period of time.

Be sure to check the availability of an extension and its conditions. Of course, it is better to choose a deposit with the possibility of automatic extension, so as not to waste time and interest every 3 months due to the need to relocate the deposit. On the other hand, it is important to know how to cancel the extension so that the deposit is not extended for another 3 months when you are already counting on these funds. At the same time, be sure to monitor the term of the end of the deposit and check the current level of interest rates on the market on the eve of reissuing the deposit.

It will also not be superfluous to find out what the bank's credit card conditions are for depositors in case you need the money before the end of the term of the deposit. And then you can open a credit card or credit limit at the bank at the same time as the deposit.

And finally, an important piece of advice. Despite the opportunity to place a profitable deposit for 3 months, try to have more long-term goals and investments. A deposit for 1 year will strengthen your financial independence and will be a profitable solution in the current situation, when deposit rates are at their peak, but will decrease in the near future. At the same time, a short deposit is a great opportunity to check the convenience of service in a new bank before trusting it with funds for a longer period of time.

Oleksiy Kiyashko Deputy head of the SME and retail business department

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