Smart Way to Save: Invest in Fixed Deposit

“Do not save what is left after spending, but spend what is left after saving.” – Warren Buffet.

When you are young, saving money seems like a daunting task. The urge to spend the money in an uncontrolled way to get by month to month is the only responsibility that we feel towards ourselves and thus do not think about a way to prepare for the future or unforeseen financial emergencies. 

One of the ways to save money for financial hardships is to start building an emergency fund. The initial step is deciding where and how to invest your hard-earned money. In India, Fixed Deposits are one of the most popular and accessible investment instruments to save money.

The most significant advantage of investing in a fixed deposit is that you cannot withdraw funds from a fixed deposit account prematurely. Thus you can easily save money to avoid any penalty fees or charges. Moreover, FD interest rates are not determined by market rates, thus investors can get guaranteed returns on their investments.

What is a Fixed Deposit?

A fixed deposit offered by banks and non-banking financial institutions allows you to deposit a lump-sum payment and earn attractive returns on the investment at a fixed rate of return for a determined investment tenure.

Here are other benefits of investing in a fixed deposit:

  1. Flexible tenure: The investment tenure of a fixed deposit ranges from 7 days to 10 years. Thus, investors can choose a short term, medium-term, or long term investment period as per their investment goal.
  2. Fixed returns: One of the significant advantages of investing in a fixed deposit is that it provides guaranteed returns on the investment. A fixed deposit offers fixed returns for the entire tenure, and the returns do not get affected by the number of funds deposited in an FD account.
  3. Rate of Interest: FD rates vary from bank to bank and are determined as per the RBI policy. As the rates are not affected by the market, thus investors can get assured attractive returns on their investment.
  4. Tax Benefits: If an investor wants to avail tax benefits on the investment, then he can invest in a tax-saver FD. A tax-saver FD allows you to get tax deductions up to Rs. 1.5 Lakhs on the investment under Sec 80 C of the Income Tax Act. This type of fixed deposits is availed for a fixed tenure of 5 years.
  5. Loan against fixed deposit: You can also avail a loan against fixed deposits by keeping FD as a security or collateral. Investors can take a loan against FD up to 90% of the amount deposited in an FD without breaking the FD. The rate of interest is 0.50%-2% higher than FD rates.
  6. Liquidity: While a fixed deposit attracts a penalty charge on premature withdrawal of funds from FD, investors can break the FD if they require funds for any emergency. Thus, having an FD ensures that they can rely on a certain amount of money when they are in financial distress.

Thus, investors can easily open an FD account and earn higher interest on their money than keeping their money in a savings account. You can open an FD account in any public or private sector banks or in a post office by visiting the branch or online as provided by many banks.

Summary: Smart Way to Save: Invest in Fixed Deposit

A fixed deposit offered by banks and non-banking financial institutions allows you to deposit a lump-sum payment and earn attractive returns on the investment at a fixed rate of return for a determined investment tenure.

  1. Flexible tenure: The investment tenure of a fixed deposit ranges from 7 days to 10 years. Thus, investors can choose a short term, medium-term, or long term investment period as per their investment goal.
  2. Fixed returns: It provides guaranteed returns on the investment. A fixed deposit offers fixed returns for the entire tenure, and the returns do not get affected by the number of funds deposited in an FD account.
  3. Rate of Interest: FD rates vary from bank to bank and are determined as per the RBI policy. As the rates are not affected by the market, thus investors can get assured attractive returns on their investment.
  4. Tax Benefits: If an investor wants to avail tax benefits on the investment, then he can invest in a tax-saver FD for a fixed tenure of 5 years. A tax-saver FD allows you to get tax deductions up to Rs. 1.5 Lakhs on the investment under Sec 80 C of the Income Tax Act.
  5. Loan against fixed deposit: You can also avail a loan against fixed deposits by keeping FD as a security or collateral. Investors can take a loan against FD up to 90% of the amount deposited in an FD without breaking the FD. The rate of interest is 0.50%-2% higher than FD rates.

Sapna Singh

Sapna is working in the Tech & Science domain in one of the top universities. She has published research papers and case studies in Technology & Science. She is an avid blogger in the domain of Tech & Gadgets, finance, Business, Entertainment. you can also find him on social networking platforms.