What Are Fixed Deposit & How to Save Efficiently With Them
All of us want to save money. Fixed deposits are one of the safest and most convenient ways to do so. When the fixed deposit matures, you can withdraw your investments along with the interest you earned on it. You can also renew your fixed deposit before maturity or extend the tenure by another year (Six months at a time). But before you go ahead and open a fixed deposit account, here are five things you should know about them:
1. What is a fixed deposit?
Fixed deposits are the safest way to invest and earn interest on your savings without having to take any risk. Fixed deposits are time-bound, allowing you to lock in your money for a fixed period of time, during which it earns a recurring interest rate that is paid out at the end of the term. On maturity, you will get back the principal amount along with any accumulated interest earned over that period. Fixed deposits are typically available for upto 5 years and offer higher interest rates than regular savings accounts.
2. How do fixed deposits work?
Fixed deposits are one of the best ways to grow your savings. When you invest in a fixed deposit, your funds are locked away for chosen tenure and the principal sum deposited earns interest on a cumulative basis. After a specific period of time and if you choose to withdraw the deposit before maturity, all the accumulated interest will be forfeited, which makes it an attractive investment option for conservative investors who want to secure their hard-earned money.
3. How to open a fixed deposit account?
Opening a fixed deposit is very simple and requires minimal documentation. When you open, you need to provide your name, address, email address, if you have one, bank account number and the deposit amount.
4. Benefits of investing in a Fixed Deposit Account:
Investing in a FD account has several advantages. Here’s why you should invest in a fixed deposit:-
Fixed deposits have a steady rate of return, which is higher than the usual savings account. Depositors can open a fixed deposit of any amount with a bank or an NBFC. You can deposit money for any period between one month to ten years. Your deposit will earn interest at a rate which is fixed in advance and paid annually on maturity of the deposit.
Fixed-rate CDs are a safe investment instrument with stable interest rates and guaranteed returns.
There is no risk of loss of principal.
If you’re looking for an additional source of income and have high savings, you can choose periodic interest payouts.
Fixed deposits are very safe. The returns from fixed deposits are not affected by market fluctuations, which ensures greater safety in times of need.
5. Tips to Invest efficiently in fixed deposits
Planning to invest in a fixed deposit? Follow these tips to maximize your returns.
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Fixed deposits are a great way to save and earn money. They help manage your finances more efficiently and put your money to work for you by generating income at a higher rate. But, if you are not careful about the choice of fixed deposit tenure for different goals, it can be quite disastrous. This is due to the fact that every deposit tenure comes with a different interest rate and principal amount. Hence, choosing the right tenure will lead you to achieve your financial goals successfully. To make things easier for you, we have provided a Fixed Deposit Interest Calculator that selects the best possible fixed deposit for any given goal or requirement (monthly income).