People no longer rely only on their savings for financial security because it may not be possible to ensure financial security with savings alone in today’s world. You may also not benefit from saving money in your savings account or your locker. There are two reasons for this – first, the idle cash in your bank account represents an opportunity loss, since it cannot earn more money, and second, it can’t combat inflation.
It is evident that earning money and keeping it idle is not enough. Rather, you must make the money work for you. But how? By investing your money.
Different types of Investment options
Several investment options are available in India. Selecting an investment plan should be based on a person’s financial goals, investment horizon, and risk tolerance. Let’s take a look at some of the popular investment options in India:
- Fixed Deposits
- Mutual Funds
- Direct Equity
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- National Pension System (NPS)
Now that we know different types of investment options, let’s look at the most popular and smart way to save money – Investing in Fixed Deposit.
What is a Fixed Deposit?
A fixed deposit is an investment product in which you deposit cash with a bank or other financial institution for a certain period and earn interest. An FD pays a greater rate of interest than a savings account, and guaranteed deposits make this type of investment far safer than investing in the stock market.
What is the interest rate for Fixed Deposit?
Fixed deposit (FD) accounts have long been a popular way to save money since they are not subject to market fluctuations and offer a fixed interest rate at maturity. But what is the interest rate for a Fixed Deposit? As of December 2021, the following are the most recent interest rates given by prominent banks for terms ranging from 7 days to 10 years. It ranges from 2.9 percent to 6.5 percent for senior citizens.
How to save more money by investing in Fixed Deposit?
While a fixed deposit provides guaranteed returns over its term, there are various methods to increase your fixed deposit earnings. Continue reading to find out how to make the most out of your fixed deposit:
Start a Fixed Deposit Online: When you open a fixed deposit online, you have the choice of browsing multiple possibilities and selecting the bank that offers the best interest rates and returns. Furthermore, most banks provide better rates of interest on fixed deposits initiated online rather than through their physical locations.
Choose Cumulative Fixed Deposits: Unlike non-cumulative fixed deposits, cumulative fixed deposits assure that you will have a larger sum accessible at maturity. You may establish a larger corpus with a cumulative fixed deposit since the interest you earn is re-invested together with your capital.
Do not make any changes to your Fixed Deposit. Fixed deposits with a set term are available at most banks and financial institutions. This implies that if you choose to take your funds before the maturity date, you may be subject to early withdrawal penalties. Once the fixed deposit term has been completed, this will diminish the maturity amount available to you.
Start Fixed Deposits in Your Parents’ Names: If your parents are senior citizens, you may open a fixed deposit in their names and receive higher interest rates that are only accessible to seniors.
Choose Tax-Saving Fixed Deposits: Fixed deposits come in a variety of forms, some of which offer tax benefits while others do not. Before you invest in a fixed deposit, make sure to look through all of your alternatives and choose the one that will save you the most money in terms of taxes.
The golden rule for starting to save is to set a monthly budget and adhere to it, and when you have extra money, invest it rather than putting it in your savings account. This will enable you to maximize your return by earning more interest in your investment funds.
Although financial institutions and banks enable you to withdraw funds before the maturity date, you will be charged a penalty if you do so before the maturity date. So, by creating an FD account and retaining the money deposited till maturity, you may save a lot of money.