Should You Get a Fixed Deposit? (2024)

You’re going to want to have some money in FD for emergencies and for planned events (housing expenses, education payments, etc. ) but you probably don’t want to save long term using FDs.

If you’re looking for ways to grow your capital in the long run you should consider saving your money elsewhere in financial instruments such as Amanah Saham, Exchange Traded Funds (ETFs) or putting more money into your Employee Provident Fund (EPF) account instead.

As an investor, there are other options that are still safe, that could potentially earn you more interest such as EPF. If we compare the FD rate to the rate you’d get if you had put your money in EPF, the difference in how much you make would be pretty large. In the below graph we show you the difference if you had invested RM1,000 in a 12 month term FD being rolled over compared to EPF.

After 10 years, the difference in your returns is RM 472

After 20 years, the difference in your returns is RM 1,493

And after 30 years, it is a shocking RM 3,565!

Note:

Though we compare saving in an FD to EPF, putting more money to your EPF account isn’t as straightforward as opening an FD. Still, you have a few options for contributing more than the statutory amount to your EPF:

• Voluntary contributions: This is an option those of you that don’t currently contribute to EPF as well as for those of you that would like to contribute to the retirement savings of your loved ones. Annual contributions are capped at RM60,000 and depending on your situation you may be able to receive additional government contributions to your savings as well. Check this link out to learn more (https://www.kwsp.gov.my/member/contribution)

• Contributing for more than the statutory rate: This option is for those of us that already contribute to our EPF but would like to do more. Both you or your employer can opt to increase the rate at which the both of you are contributing towards your EPF savings. This new rate would then apply to all subsequent EPF contributions you or your employer makes. Check this link out to learn more (https://www.kwsp.gov.my/member/contribution/contributing-more-than-the-statutory-rate)

• Also since your EPF savings are meant for retirement, there are restrictions on when you can access that money. You wouldn’t have full use of that money until you were to retire. This makes it a much longer-term investment than FDs

For details on the chart, click here.

Assumptions