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Fixed Deposits are one of the oldest ways to save money. It is the best savings option for those looking to set money aside. With a fixed deposit, you get accustomed to a disciplined savings option without splurging on ad hoc expenses. 

What makes Fixed Deposit a better savings option?

Even though investments have become the new-age trend, savings still give you that certainty of assured returns. With the whole profit and loss equations, there are a lot of monetary risks involved, when it comes to investments. So, for someone who doesn’t completely understand the stock market, it is always better to choose a simple savings instrument that offers consistent growth of returns. 

Saving with fixed deposits involves lower risks, whereas stock investments involve higher risks. As the stock market keeps fluctuating, the monetary risks involved are also high. Stock investments may help you gain from higher profit margins, but the risk of losses is also higher. 

FDs have a fixed tenure, but you can withdraw the amount before maturity. However, with stocks, you can sell at any point, albeit with the risk of loss of principal amount. It’s always a safer choice to save with Fixed Deposits, as you can get assured returns. 

What are Fixed Deposits?

A fixed deposit is a savings option wherein you deposit a lump sum amount in your bank account for a fixed period and make profits on the compound interest after its maturity. The tenure and the rate of interest are fixed, which makes it risk-free and you get assured returns. FDs are also known as term deposits, due to their fixed tenure and the assurance of guaranteed returns.

A fixed deposit is a saving instrument which helps you maintain the liquidity of funds. It is not only one of the safest options to save money, but also a way to boost the circular flow of the economy. It’s a form of saving that serves the economy. FDs are savings instruments which serve the benefit of customers and the economy, as a whole.

Fixed Deposit Interest Rates:

FD interest rates are fixed, and these rates are decided based on the tenure you choose. The total maturity amount you earn on depositing a fixed principal amount in a fixed deposit is calculated by a formula. 

The formula for this calculation is A=P(1+r/n)^n*t

In the above formula, A = Maturity amount, P = Principal amount, r = ROI, t = number of years, n = compound interest frequency.

The computation of your returns can be difficult, if you choose to do it manually. However, you can save yourself the hassle of these complex calculations with the FD interest rate calculator

To use this FD Calculator, you simply need to enter your deposit amount, tenure, and preferred payout option. The maturity amount, interest amount and maturity date is automatically reflected within a few seconds. 

Types of Fixed Deposits –

When planning a fixed deposit saving option, you may come across different terms associated with your deposit type. Some of the most commonly heard fixed deposit types have been listed below:

1. Tax-saving Fixed Deposit – As the name suggests, tax-saving FDs are meant to save taxes. With a lock-in period of 5 years, these FDs enable investors to save tax deductions of up to 1.5 lakhs. It is a great way to save up on taxes without risking your finances and getting stable returns. Most banks offer tax-saving deposit options that help you claim tax benefits.

2. Senior Citizen Fixed Deposit – It is one of the most popular saving instruments among senior citizens. Senior citizens usually put some amount of their pension and savings in these FDs and enjoy steady returns. It is a safe and easy way for them to enjoy the interest without risking the safety of their principal amount. 

Banks and NBFCs offer higher interest rates (up-to 0.25% high) for this form of FD. It offers flexible tenure and can be opted for by senior citizens above the age of 60 years. What’s more - senior citizens can choose periodic payout frequencies, which help them generate periodic income to meet their regular expenses. 

1. Cumulative Fixed Deposit – This form of FD pays the interest along with the principal amount, upon maturity. It enables you to earn a lump sum interest amount. Cumulative FDs are best for savers who want to maintain a good amount of investment corpus with specific monetary goals.

2. Non-cumulative Fixed Deposit – This type of Fixed Deposits offer the option to receive interest on a monthly, quarterly, half-yearly or an annual basis, depending on your convenience. This type of FD is advisable for savers looking for funding regular expenses without denting the existing principal amount.  

3. NRI Fixed Deposit – This type of fixed deposit helps Non-residential Indians (NRIs) grow their savings at attractive interest rates. There are sub-categories or rather many other options to choose from in this type of FD which are mentioned below:

  • NRE Fixed Deposits
  • NRO Fixed Deposits
  • FCNR Fixed Deposits
  • RFC Deposits

It is important to note that these NRI Fixed Deposits differ based on currency, reparability, tax and tenure.  

The different types of fixed deposit options available can help you plan your investment needs better. For those who want to enjoy the ‘interests’ of their ‘saved’ money and want their savings to be ‘risk-free’, a fixed deposit is a great savings option. 

However, if you’re looking to grow your investment returns with stocks, you can still consider saving a portion of your savings in a fixed deposit. This can be a good way to balance your risk with consistent returns. 

Disclaimer: This article is a paid publication and does not have journalistic/editorial involvement of Hindustan Times. Hindustan Times does not endorse/subscribe to the content(s) of the article/advertisement and/or view(s) expressed herein. Hindustan Times shall not in any manner, be responsible and/or liable in any manner whatsoever for all that is stated in the article and/or also with regard to the view(s), opinion(s), announcement(s), declaration(s), affirmation(s) etc., stated/featured in the same.

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