Savings are important for most of us. Even if we only manage to put away a small amount each month, it will accumulate, grow, and significantly benefit you in the future. However, experts and financial advisers recommend against keeping all your money in a low yielding account. Ideally, you should have an account that provides both security and strong growth. One such scheme is a Fixed Deposit account.
You place a fixed amount of funds into this account and leave it untouched for a specific maturity period. Over time, your nest egg will grow – by how much depends on the annual interest rate it earns.
In case you aren’t sure about fixed deposits, here are some of its advantages. These will show you how this type of account can benefit you:
Benefit 1: Assured Returns
When we talk about investments, there is always an element of risk. Investors worry about losing all their money or how much it will grow. However, there are no such worries related to a fixed deposit account. You can treat it as you would a Savings Account; your funds are secure. In addition to this, there is a minimum growth guarantee. All you need to do is wait for the policy to mature.
Benefit 2: Flexible
Fixed deposit accounts are flexible in terms of amount and tenure. There can be a minimal amount of deposit, but that will be low enough to fit your needs. You can also choose how long you want to keep your hard-earned money in that account. The period to maturity can range from seven days to up to ten years.
Benefit 3: Better Interest
If savings and fixed deposit (FD) accounts are basically the same, you are probably now wondering why you should bother to switch. The answer is simple; better interest rates. As FDs don’t have liquidity on money, they offer higher returns. The interest rate depends on the plan and tenure that you choose. The longer you keep your money in the account, the better your return on investment (ROI) will be.
Benefit 4: Offers Loans
Financial emergencies never come with a warning. They emerge unexpectedly out of nowhere. In most cases, when people find themselves in an emergency situation, they need access to funds quickly.
If you have no spare cash available, it is possible to use your fixed deposit account. This does not necessarily mean cashing it in. Many financial institutions provide loan facilities on their FD accounts. How much you can borrow depends on many factors, including the amount you have deposited, your age, job, monthly expenses, income, and credit score. For most people, taking out a loan makes more sense than cracking open their fixed deposit accounts.
Benefit 5: Tax Saving
If you have a regular job, you must look for opportunities to save on tax. There are many different ways you can do this
Fixed deposit accounts offer tax benefits. If you are not sure what benefits you might be entitled to, talk to your bank, accountant, or a qualified financial adviser.
Hopefully, after reading this article, you are now aware of some of the benefits that fixed deposit accounts can offer and why they might be a better option than a savings account. All you need to do is place at least the minimum required, sit back, and your savings will start to grow.
Interesting related article: “What is Return on Investment (ROI)?“