Smart Moves For Short Term Money

With more than $221 billion currently parked in term deposits and savings accounts, there’s a staggering amount of cash sitting idle across New Zealand. For Kiwi investors and advisers this presents a significant opportunity to rethink how short-term funds are put to work, and how to build stronger, more productive portfolios for clients in the process.

Despite the Reserve Bank's decision to hold the Official Cash Rate at 3.25%, data shows term deposit rates have fallen by nearly a third in less than 18 months. Investors are now facing maturing deposits that don't deliver the returns they once did. In this environment, it makes sense to reassess income strategies and explore more effective alternatives.

While Term Deposits can still play a role for short term certainty, they're no longer the only option. Cash Funds such as the Kernel Cash Plus Fund are designed to deliver returns above standard cash rates while offering daily liquidity. They give investors flexibility without sacrificing performance.

At the same time bond funds such as the Kernel NZ Bond Fund, or the Kernel Target Date NZ Bond Funds March 2027 and March 2029, can deliver a steady income stream whilst serving as a stabilising component of a diversified portfolio.

In addition, a key benefit of using multi-rate PIE funds over traditional term deposits is tax efficiency. With tax capped at 28%. PIE funds offer a significant advantage over the 39% top personal tax rate on interest earned from term deposits and bonds held directly. This difference can provide a meaningful boost to after tax returns.

A modern investment strategy doesn't force a choice between safety and growth, it integrates both. In today’s low-yield environment, making cash work harder, without sacrificing flexibility or security requires a well-diversified portfolio with the right mix of assets to balance the immediate need for income with the potential for future growth.