Whether you are on the payroll or are self-employed, a good savings plan is a necessity. It helps you prepare for unforeseen circumstances and increase your wealth. However, it isn’t easy to maintain a good savings portfolio despite the best efforts and intentions. Hence, you need to maintain a budget for savings and stick to it.
Today, you need to know how to preserve money and increase it over time through planned investments. There are numerous financial instruments, such as fixed deposits, that can help you maximize savings. Among these, most people favor fixed deposit as an ideal savings platform for a variety of reasons.
What is a Fixed Deposit?
A fixed deposit is a financial instrument that allows you to invest your savings for a duration and reap massive returns from it. Unlike investments into stocks, these deposits are secure and contain very few inherent risks since they do not fluctuate with the market.
Fixed deposits provide better interest rates than standard savings accounts. Thus, they are one of the safest and most profitable investment schemes.
How Fixed Deposits Can Help You Save Money Efficiently
Lucrative Interest Rates
Everybody wants to see their money grow when they consider an investment.
Since fixed deposits have high-interest rates, it is the choice for many individuals. Make sure to check the latest FD rates with the corresponding tenure whenever you consider investing in a fixed deposit. It will help you choose the term of maturity.
Various Options For Receiving Interest
When you opt for a fixed deposit, you can choose how you want to accept interest. You can accept it in periodic payments or after the tenure of the FD is over. However, a fixed deposit provides the best effective FD interest rates when they remain in the account until maturity.
Additionally, you can break your fixed deposit for a penalty and use the money for emergency purposes.
Fixed Deposit Builds a Habit of Saving
When you invest in a savings account, you can withdraw your balance at any time. In contrast, a fixed deposit has a lock-in period, which prevents you from withdrawing your money. In the longer run, it will help develop a habit of saving.
How to Invest Efficiently in Fixed Deposit
While a fixed deposit is a secure investment, you need to pay penalties if you break the FD. Investing all your savings for the long term may help you get better effective interest rates and returns. However, it limits disposable money that you may require for expenses and for clearing debt.
To resolve this issue, you can try laddering up your investments on fixed deposits. Instead of having one fixed deposit, you can distribute it into numerous smaller deposits with different time durations.
For example, you can have a fixed deposit for one year, another for five years, and another one for ten years. It will help you generate a good maturity value after each year with a better return after five years and a full return after ten years. Ladder your fixed deposits depending on your necessities.
A fixed deposit can help you in saving money. However, you must be aware of the latest FD rates to choose your preferred fixed deposit. Some financial institutions like PNB housing provide up to an effective 9.13 percent on your deposit.