Many people feel that even after getting their salary, money doesn’t actually accumulate in their bank account. I felt that way too, but in the end, you need a strategy to save money. Especially if you want to build a lump sum, it’s important to understand and use the meaning of fixed-term deposits properly.

The meaning of a fixed-term deposit is simple. It’s a product where you deposit a certain amount of money with a bank for a set period and receive interest when it matures. You can think of it as lending money to the bank and getting interest in return. The advantage is that the interest is much higher than with a passbook or account where deposits and withdrawals are free. Of course, there is a penalty if you touch the money before maturity, but you can choose a term from 1 month to 5 years, so you can use it according to your situation.

But fixed-term deposits aren’t the only option. There’s also a savings plan, where you consistently save a fixed amount every month. The interest is lower than that of a fixed-term deposit, but you can start with a small amount, and it’s good for building saving habits. And there’s also a deposit account for frequent deposits and withdrawals, which is mainly for managing salary or daily expenses, so the interest is almost nonexistent.

Before learning the meaning of a fixed-term deposit and signing up, there are a few things you should definitely check. First, the interest rate. It differs from bank to bank and also varies depending on the term, so comparison is essential. As of early 2025, I think the 1-year term was around 2–3%, and the 3-year term was about 2.5–3.5%, but it will be different now. Second, you need to check the preferential interest rate conditions. If you meet requirements such as salary transfers or card usage, your interest rate increases.

Once you understand the meaning of deposits accurately, choosing becomes easier too. If you have a lump sum and want to grow it safely, fixed-term deposits are the answer. In Korea, under the Deposit Insurance Act, up to 50 million won per bank of principal and interest are protected, so you can feel reassured. It’s also not affected by market fluctuations the way stocks are.

There are also handy personal finance tips. One method is called “windmill investing.” You subscribe to fixed-term deposits every month, and when they reach maturity, you reinvest them—so the process keeps going steadily. You can also aim for the effects of compound interest, and since maturities are spread out, you can withdraw funds when you need them. Also, if you need urgent cash, it’s better to borrow using your fixed-term deposit as collateral than to cancel the deposit. The fees are lower, and the interest is cheaper.

In the end, the key is to know the meaning of fixed-term deposits and choose based on your own situation. For investing a lump sum in the short term, choose terms of 6 months to 1 year, and for growing assets long term, choose terms of 3 years or more. It’s also good to know the difference between simple and compound interest—if it’s long term, compound interest is far more advantageous, because interest is earned not only on the principal but also on the interest itself.

Fixed-term deposits are a really good option for people who want stable returns. However, since there is a penalty for early withdrawal, it’s important to plan your finances carefully and sign up with the right product. If you compare interest rates and conditions across banks and choose the one that fits you, you’ll be able to get one step closer to your personal finance goals.