Fixed Deposits & How to Save Efficiently With Them

A fixed deposit is an investment instrument that enables you to earn interest on your deposited savings at a predetermined rate. The lock-in period for the investment amount is also fixed and you can withdraw both interest and the deposited amount once the FD matures.

It is a popular instrument since it assures both high returns and stability. A recurring deposit or RD is another instrument that also assures high returns and stability of invested amount. However, the key difference between RD and FD is that FD acquires interest on the deposited amount throughout the tenor whereas RD acquires interest only up to the period during which each deposit was locked in.

Now, let us look at some of the ways through which you can save efficiently by investing in a fixed deposit:

Compare FD Plans Carefully

  • The interest rate and other features of an FD plan differ according to the bank or NBFC that you choose to invest in. Therefore, it becomes essential to compare different FD plans based on their interest rate, stability, and features.
  • FD return calculator is an online tool that calculates the exact returns that you can expect after investing in an FD. Most banks and financial institutions offer this calculator on their website and you can use it to determine whether a particular FD plan is beneficial for you or not.

Invest in Multiple FDs

  • Instead of depositing your entire savings in one FD, you can divide your funds and deposit them in multiple FDs. This not only allows you to ladder your investments but you can also break one of your FDs instead of breaking the entire deposited amount whenever there is a financial emergency.
  • Finance companies like Bajaj Finance allow you to open multiple fixed deposit accounts with a single cheque using the multi-deposit facility. Moreover, there is no need to wait in long queues for opening an FD account since you can fill and submit the FD form online

Reinvest your Returns

  • Once an FD matures, you can reinvest the principal amount along with the interest earnings since it will help to grow your returns at a faster rate. Many financial institutions and banks are also offering an additional interest rate on an FD renewal.
  • For instance, Bajaj Finance not only allows you to select the option of auto-renewal while filling-up the form but it also provides an additional 0.10% on renewing an FD.

Safety Along with High Returns

  • Apart from the high returns, you should also check whether your deposited amount is safe or not. While bank FDs are safe, the FD interest rate has been reduced by most of the banks due to the economic slowdown.
  • Bajaj Finance FDs have received stable ratings by credit rating organizations like ICRA and CRISIL. You also get interest rates up to 7.60% on booking an FD and senior citizens get an additional rate of 0.25%.

The tenor can be set between 12 and 60 months as per your requirements and the minimum amount that is required to invest in a fixed deposit is just Rs. 25,000. If you are not keen on investing a lump sum amount then you can start saving by depositing just Rs. 5000 per month in an SDP (Systematic Deposit Plan).

The number of deposits can be between 6 to 48 and each of these deposits can be locked-in for up to 60 months. The benefit of investing in an SDP is that every deposit is considered as a separate FD and therefore, you might get the prevailing interest rate that is applicable on the date of deposit.

A fixed deposit scheme allows you to grow your income without subjecting your deposited amount to any risk. The interest rate offered on a fixed deposit in India might not be as high as it was a few months before due to the ongoing economic crisis.

However, some finance companies like Bajaj Finance are still offering interest rates up to 7.60% for regular customers and senior citizen FD rates are up to 7.85%. You can avail the multi-deposit facility to ladder your investments and you can also save efficiently by renewing your matured FDs. Moreover, you can also invest in an SDP if you are interested in growing your monthly savings quickly.

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About FinanceGAB

Ajeet Sharma is a financial blogger and I am blogging since 2017. Financegab is a personal blog dedicated to personal finance. The main aim of this blog to help people to make well-informed financial decisions.
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