Saving a part of your income is good practice. And a fixed deposit is a savings and investment scheme that is unaffected by fluctuations in market variables. It fares better than even the PPF and the senior citizen’s savings scheme, which are government-backed and therefore thought to be solid savings schemes.
Here are some reasons why the fixed deposit tops the list:
Investment in a fixed deposit (FD) increases your savings rate and keeps inflation at bay. The FD is also a safety net against the vagaries of an uncertain future. Pension will cover post-retirement month-to-month expenses, but the highest FD rates add to the sense of security.
Immunity against market fluctuations is, perhaps, the single biggest advantage of the fixed deposit. The FD thrives on the back of almost nil risk. Other savings schemes may have their merits, but the fixed deposit is a standalone attraction.
Check the various banks for their fixed deposit schemes, and you will be surprised. Some public sector banks have clinching and the highest FD rates. Therefore, banking on the FD is a wise option. Even the Public Provident Fund pales in comparison.
Mutual funds and stocks will promise higher returns, but they wilt when stacked against fluctuations in market variables. Sudden, unexpected losses are a risk with mutual funds and shares. The FD, on the other hand, sails through on a fixed and unwavering interest rate.
Compared to the PPF, the fixed deposit allows partial withdrawal, and there is no lock-in period. Taking a loan against a fixed deposit, up to a certain percentage, is another advantage. Some public sector banks allow a loan of up to Rs. 4 lakh. Others offer the highest FD rates. And there is no lock-in period. You can invest up to 5 years, or as per your financial goals.
The senior citizens’ savings scheme or SCSS is a savings and incomes scheme for senior citizens aged over 60. It fetches an interest rate of 8.6% and is government-backed. Investment can be up to a 5-year tenure, and the investment can be renewed once. The fixed deposit tenure, on the other hand, is flexible and has the highest FD rates. A fixed deposit for 36 months, for instance, will earn you an interest of up to 8.70%. With some FD, you can opt for periodic payouts – a regular monthly or quarterly income!
The recurring deposit, unlike the fixed deposit, requires recurring contributions of a fixed amount. But there is a flaw when RD is ranged against the FD. The RD interest rate keeps falling with time. The fixed deposit’s one-time payment earns a fixed interest for its entire tenure. The RD’s tenure keeps reducing, and with it, the returns also keep falling. The fixed deposit also allows easier partial and premature withdrawals.
Given these advantages, it’s a no-brainer why people, whether young or old, fall for the fixed deposit as a savings option. The FD stands tall among the array of savings schemes on offer. The fixed deposit is a solid and stolid presence in a financial portfolio.
