Top Benefits of Saving Through FD You Must Know

For many Indians, saving money for a rainy day simply means opening a Fixed Deposit or FD account. You might have heard your parents or grandparents getting regular returns through their FDs as a secondary income source. Setting aside a specific amount in an FD is much better than choosing a savings account in a bank as an alternative. For many investors who fear the very term ‘market volatility’, FD is one of the safest investment options.

If you want to keep a certain amount aside to receive good returns without any risk, go for an FD. You will receive several benefits with this decision.

Why Should You Invest in Fixed Deposits in India?

Guaranteed Returns

You might have heard about the return-to-risk factor that most investors consider as a part of investment planning. Phrases like ‘high risk-low return’ does not fit into the context of an FD. It is because FD is one of the safest investment options available in India. The returns are not market-driven, hence guaranteed as per the invested amount and chosen tenure.

Unlike other investment options with which you do not know what to expect as returns, you get a fixed return with an FD. The rate of interest related to a Fixed Deposit account may vary from one bank to another. But it stays the same throughout the FD tenure.

Encourage Disciplined Savings

Saving a specific amount regularly is not easy for every earning individual. Whether it is increasing financial needs or sudden expenses, many people face financial crunch while making ends meet. Still, they want to balance their expenses and savings somehow to create a fund for future needs.

Starting with an FD investment will make you learn the importance of savings in life. Since there is no significant risk involved in opening a fixed deposit account, you need not feel hesitant about it. Also, FD is highly liquid, which means you can break it prematurely in case of a financial emergency.

Higher Returns for Senior Citizens

Achieving financial independence after retirement is a life goal for many individuals. Generally, senior citizens do not want to be dependent on their loved ones for their needs. This is one reason why many senior citizens prefer keeping a certain amount in an FD to enjoy a guaranteed income source.

Most banks and NBFC (Non-Banking Financial Companies) offer FD interest at a higher rate to senior citizens. This rate is above the standard FD interest rate for other individuals.

Flexible Payout Options

You can get the interest you earn with FD investments through any of the two payout options – Cumulative or non-cumulative. If you choose the cumulative option, the interest earned is compounded over the tenure, and you will get the total interest paid on maturity. On the other hand, the non-cumulative option makes you eligible to receive the interest after regular intervals.

If you want to receive the FD interest in the form of regular income, select the non-cumulative payout. That’s what most senior citizens prefer for their retired lives.

Loan Options Against FDs

A financial emergency can occur anytime but drains all the savings in the least time. To deal with such situations, people often resort to unsecured loans at high-interest rates. Repaying such loans can take a toll on the borrower’s life.

You can avoid borrowing loans at high rates by financing emergency needs through a loan against FD. All fixed deposit account holders get this facility in which the interest is charged at a low rate. Hence, you need not worry about managing finances during tough times.

FD is an easy-to-understand investment option. Unlike many other financial instruments, you need not monitor the FD rates periodically or worry about the market-related dips. You can choose a renowned bank such as Axis Bank to let your savings grow in an FD account.

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