Many commercial, financial and lending institutions provide various services to their customers. One of such services is the Fixed Deposit (FD) account facility. Money in these accounts is deposited for a fixed period like six months, one year, two years, five years, or even more.
These deposits are not demanded deposits. Cheques cannot be issued against these deposits for making personal payments. Technically and legally, if a person has deposited money in an account for two years, they cannot withdraw the money before the expiry of the period.
However, many lending institutions allow depositors to withdraw funds without such strict restrictions, provided the depositor is willing to lose a part of the interest. FDs are interest-earning deposits. The interest on these deposits is much higher than deposits in a savings account. The interest rate on fixed desposits depends on the length of time for which the deposit has been made.
5 primary ways in which you can increase your savings amount from Fixed Deposit Accounts:
- Long tenure investments
If you’re investing in an FD account and want a generous amount of return, long-tenured investments can be the best option for you. To get the best returns, pick the longest possible tenure. If the goal is to increase your hard-earned income, FD with a long maturity period is the best option.
- Small Savers
Even if you own a small business or you’re a small saver, FDs can help you save more. There is a particular type of deposit called recurring or cumulative deposit, in which a depositor can make regular deposits of a given sum of money for a specific time. It helps a person to save a particular amount regularly.
While investing in fixed deposits, you can choose the frequency of interest payouts which decides the interest rate to be applied. Financial institutions offer you several options, ranging from monthly to lump-sum payouts. Logically, the lump sum payout provides you with the highest return. Suppose your sole motive is to earn more on your total investment. In that case, you should choose the lump sum payout before making an investment in FD, tally, and find the best FD interest rate because it may differ from one financial institution to another.
- Reinvest your interest
To amplify your earnings from your FD account, keep re-investing the interest amount that you receive on the maturity of the term. This can help you generate more money.
- Ladder investment
Here, instead of investing in one particular FD, you invest in an uneven pattern, i.e., in multiple FDs. It is highly recommended as it allows you to arrange your investments according to your financial needs.
However, it is recommended to check the best FD interest rates before investing your money!
An Fixed deposits account is one of the most popular investment instruments in India with both senior citizens and millennials. They provide multiple advantages. You can make your savings grow by opening a fixed deposit account at a bank or financial institution and saving your money.