The safest and most secure instruments to place your surplus money with assured returns can either be a savings bank deposit or a fixed deposit.
For every individual, whether salaried or self-employed, saving is an essential part of life.
It is wise to plan your savings at an early stage of your life.
However, merely parking them in a savings bank account doesn’t sound that good; instead, the surplus accumulated can be efficiently invested in a fixed deposit account that promises guaranteed returns with more earnings.
Also, interest on fixed deposits is comparatively higher than on savings accounts. Interest on fixed deposit.
Reasons why you should Prefer Fixed Deposit over Saving Account
Avoid Market Fluctuations
The safest way to generate good returns and avoid market fluctuations is by investing your money in a fixed deposit. You can get a definite roadmap of how to increase your money by computing the profits on a fixed deposit calculator before your investment. This could help plan your financial investment in a robust way compared to a simple investment in a savings bank account.
Generating a Higher Rate of Interest
While investing money in a savings bank account will offer you an interest rate, it’s very low in comparison to the interest provided in a fixed deposit scheme. Besides, the interest rates keep fluctuating depending upon the market scenario.
Fixed deposits, however, offer a stable interest rate that is locked for a particular period irrespective of market conditions. It also combats the inflationary phase that erodes the purchasing power of money, as the investor gets a chance to accelerate his funds through this scheme.
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Induces a Habit of Savings
In a savings account, a customer gets flexible access to withdraw money at any point in time. This ultimately leads to deprivation from earning the bonus interest rate over some time. With a fixed lock-in money period, unnecessary withdrawal ceases until the fund reaches its maturity stage.
Limited access to your money will eventually end in saving more. This, in turn, will boost the compound interest that will add up extra to your principal amount and lets you accumulate more money.
Benefits from Periodic Interest Payouts
Through a fixed deposit scheme, you can plan your expenses as per your needs and take advantage of the regular interest payout, unlike the savings bank account. In post-retirement plans, this facility becomes more convenient to cater to your uniform expenses through monthly income.
Select from the monthly, bi-monthly, quarterly, or semi-annually non-cumulative FD if anyone is seeking a regular interest payout. Else the cumulative FD with accrue earnings on maturity.
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Loan on a Fixed Deposit
Another benefit that is obtained in a fixed deposit scheme is the facility to get a loan against the FD. Here the fixed deposit scheme is taken as collateral by the bank or the financial institution. Plus, the interest rate charged on loans against fixed deposits is much less in comparison to conventional loans.
Safety of Capital
Well, this point is suitable for risk-averse investors. Fixed Deposits are less riskier in comparison to other investment options. However, as the name suggested, set, so there is a fixed return. Thereby, we can conclude before investing, check your profile, and match it with your roles and goals.
Tax Benefits
You can avail of a tax benefit on FD. Opting for a longer tenure like five years can be useful. Moreover, opening more than one fixed deposit can also be helpful.
There is the freedom to traverse across the various schemes in a fixed deposit and securely grow your wealth in comparison to a savings bank account. With a fixed deposit, you can get a higher interest rate than a regular savings bank account. Senior citizens get a premium rate, which remains uniform in savings bank accounts irrespective of age.
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A Simple Contrast between Saving and Fixed Deposits
Savings are good. But if your money is not growing, it is a waste of time. Thereby a combination of savings with a fixed deposit is also right. Fixed Deposits can act as a personal Peggy bank and emergency fund. Not only savings but investing your savings can lead to real growth.
There are always pros and cons associated with every investment. If we are to talk about the fixed deposit. People prefer it due to low risk and nominal returns. Also, in total, it is safe. However, taxes can be deducted in some cases, and it is less liquid.
Keeping in mind the inflation rate, an FD can be a good option to park your funds. It is good to have some money reserved. As per the financial advisors, I am putting all eggs in one nest is not good. Investing in different investment funds is a good option for long-term growth and capital generation.