"Chinese people's enthusiasm for deposits, is it wise to keep deposits?".》
With the three-year epidemic, the enthusiasm of the Chinese people for saving money has been rising. According to the latest data, in the first quarter of 2023, new deposits reached 99 trillion yuan, with an average of 3 new deposits per month3 trillion yuan. People choose to keep their money in the bank mainly to deal with risks such as unemployment, illness and the pandemic. However, there have been some controversies about the choice of deposit method recently. There are five reasons why it has been argued that "term deposits" stored in banks are not desirable: the illiquidity of fixed deposits, the gradual reduction of interest on deposits, the risk of bank failure for depositors, the difficulty of keeping interest on deposits to outpace inflation, and the loss of significant opportunity costs. However, there are also those who dispute these views and point out that fixed deposits in individual cases are worth trying.
They recommend depositing money in short- to medium-term deposits for 1-2 years, choosing to deposit in large state-owned banks or diversifying deposits across multiple banks to diversify risk, and keep money in banks waiting for better investment opportunities. Therefore, it is not possible to generalize whether or not to make a "fixed deposit", and the decision needs to be made based on individual circumstances.
For the first point, which is that fixed deposits are less liquid, it can be said that it is true. Once money is deposited into a fixed deposit, we cannot withdraw it at any time during the term of the deposit, and the principal and interest can only be obtained after the maturity of the deposit. This lack of mobility is a real problem for those who may be facing a sudden emergency.
The second point is that the interest on deposits is gradually decreasing. Since China's interest rate is at a historically low level, the interest income of fixed deposits is also relatively low. In particular, the central bank has lowered deposit interest rates several times recently, making deposit interest almost insignificant.
Therefore, if you are looking for a higher interest yield, a fixed deposit may not be the best choice.
The third point refers to depositors bearing the risk of bank failure. This view is not entirely accurate, because China has a relatively sound deposit protection mechanism, that is, the deposit insurance system. Under this system, everyone's savings will be protected to a certain extent, and even in the event of a bank failure, they will not lose all of their deposits.
The fourth point is that it is difficult for deposit interest rates to outpace inflation. Due to the relatively high level of inflation in Malaysia, the interest income on fixed deposits may not be able to offset the negative impact of inflation to a large extent. For those who want to preserve and grow their value, the return on depositing a fixed deposit may not be ideal.
The last point talks about the opportunity cost of losing a lot. If you lock a large amount of money into a fixed deposit, you will not be able to take advantage of other investment opportunities in a timely manner, and you will lose out on opportunities that could lead to higher yields.
This view is reasonable, especially in the current market environment, where there are many other investment options to consider.
However, we should also see other voices for these views. Some believe that, in individual cases, fixed deposits are still a more reasonable form of deposit. They recommend putting money in a short- to medium-term deposit for 1-2 years, which avoids the problems caused by locking money in a fixed deposit for a long time. At the same time, the choice of depositing in large state-owned banks or spreading deposits across multiple banks can reduce the risk of bank failure. In addition, it is also a wise practice to keep money in the bank and wait for better investment opportunities.
To sum up, there is no generalization about whether or not to deposit a "fixed deposit", and the decision needs to be made based on the specific situation of the individual. If you have high liquidity requirements, or want to pursue higher interest income, or have better investment opportunities, then storing in fixed deposits may not be the best choice.