Firstly, what are recurring deposits exactly? A recurring deposit (RD) account is an investment vehicle that allows investors to make regular monthly deposits to save a good amount of money over a specified period of time. Investors can choose the tenure and amount as per their convenience. RD schemes are usually more flexible than fixed deposit schemes and are generally favoured by people who want to start saving money and create a corpus for rainy days. For making easy calculations and estimations, you can use an RD Calculator.
Here are a few advantages of recurring deposits which make them a lucrative investment option:
- Save Bit by Bit
While investing in a recurring deposit account, you need to decide the tenure and investment amount in advance. You can set this amount after adjusting for your monthly and other expenses, such that this amount doesn’t seem to be an additional burden. You can calculate the amount using an RD calculator available across various websites.
- Small Investments
You need not invest a lump-sum amount if you choose to invest in recurring deposits. You can start investing with an amount as low as Rs.1000, this amount however varies across different financial institutions. The amounts are regularly deducted from your account, which inculcates a habit of disciplined savings.
- Good Interest Rates
Recurring deposits earn interest at a constant rate throughout the year, they are immune tomarket fluctuations. Thus, the interest rate is usually equal to or more than fixed deposits, thus proving to be a passive income source. You can make calculations based on your investment amount using an RD calculator. To make comparisons with returns on SIP investment, you can use anSIP calculator as well.
- Flexible Investment Option
Earlier, investors used to be penalized for not depositing money on time. But, now, even if you miss depositing the amount for a month, there’s no penalty charged for the same. However, this provision varies across different banks. In the context of withdrawals, one can easily make partial withdrawals before maturity. In case of such withdrawals though, a small fee may be levied.
- Easy To Open Account
Opening an RD account is easy, as most of the banks have an online facility for the same, along with the convenience of making calculations using an RD calculator. It just requires your basic information and a few documents, and your account is open!
- A PlanFor Fulfilling Financial Goals
Everyone has different dreams and financial goals to fulfil in life based on their priorities and choices. With a well planned RD you can easily accomplish your long-term goals without straining your finances. Your life goals might include a foreign trip, your child’s higher education, retirement planning, down payment of your dream home or car, etc. While you set aside an amount every month, you’ll be able to save a fair amount of money in the long term.
- Commitment Period
The commitment period or tenure in case of recurring deposits is less as compared to other investment options. Usually, the tenure for most instruments is 12-24 months, whereas, in the case of recurring deposits, the minimum tenure starts from 6 months, (this may vary from bank to bank). Initially, you can choose an option with a short tenure and scale up as you grow professionally.
Start Investing Your Money in Safe Investment Vehicles
When you’re in the initial stage of investing your hard-earned money, you should ensure that you start with safer options which help you gain substantial returns. This boosts your confidence and helps to inculcate a habit of making disciplined savings. Depending on your financial capacity, you should make estimations using an online RD calculator.You should choose credible banks such as Axis Bank, which provide competitive interest rates and explicitly mention all terms and conditions. They try to maximize investors’ returns and offerthe best available options depending on their financial capability.