Deposits & Money-Market Instruments

A DEPOSIT is money placed with a bank; the bank owes it back to the depositor (the depositor is an unsecured creditor of the bank) and pays interest in return. The principal amount is fixed in money terms — a deposit does not fluctuate in market value the way a share or bond does.

MONEY-MARKET INSTRUMENTS are short-term debt securities — typically maturing within one year — issued by governments, banks and companies to borrow cash for short periods. They are close substitutes for holding cash because they are low-risk and easily converted back into money.

Both sit at the LOW-RISK, LOW-RETURN end of the investment spectrum. Investors use them for capital preservation, liquidity and a modest yield, rather than for capital growth.

Because they are simple, familiar and comparatively low-risk, deposits and plain money-market instruments are treated as Excluded Investment Products (EIPs) rather than the more complex Specified Investment Products (SIPs).

A SAVINGS ACCOUNT holds money that can be withdrawn on demand (or at very short notice) while earning interest. It combines everyday accessibility with a small return.

Key features:

• •High liquidity — funds are available on demand, so the account is suited to an emergency buffer or day-to-day cash.
• •A relatively LOW interest rate, reflecting the convenience and instant access; rates are usually variable and can change at the bank's discretion.
• •Interest is often calculated on the daily or monthly balance and credited periodically.

The trade-off is explicit: the more liquid and accessible the account, the lower the return it typically offers.