Benefits of Investing in Term Deposits
An individual opting for a recurring deposit of just Rs. 1,000 per month when joining his or her first job will accumulate a sizeable amount of capital in a span of just ten years. Investing bonus income and additional savings in tax saving term deposits or standard fixed deposits will help the youngster earn 8-9% interest with virtually no risk of loss of investment.
This may not seem like a lot at first. However, a combination of a RD for Rs. 1,000 per month and fixed deposit contribution of Rs. 50,000 per year, a total investment of Rs. 62,000 per year will result in total returns in excess of Rs. 9.5 lakhs (gross) in just ten years
A 22-year old person opting for such an investment will have the funding the down payment for home purchase in a span of just ten years. Of course, the tax-saving component will help reduce the overall tax outflow through 80C deductions as well.
On the other hand, an individual who saves just Rs. 10,000 per year, and chooses to spend the bonus on holidays and smart phone upgrades, will end up with just Rs. 1.5 lakhs in ten years.
The individual who made smart use of term deposits at an early age will have cash to start a new business, buy a home, invest in shares, go to a foreign destination for the honeymoon, or buy adequate term and endowment insurance plans without any hassles. Further, the lump sum savings of close to Rs. 10 lakhs will be enough to help him or her manage any financial emergency without any issues whatsoever.
On the other hand, the individual who ignored deposits may be forced to beg for assistance from friends and relatives in event of loss of job or any other unforeseen emergency.
Setting up Fixed Deposits
While staying put in a fixed deposit for a long time is always going to help you enjoy good savings, consider the following points when setting up your term deposit:
- Combine long-term deposits with short-term options to enjoy good returns as well as easy liquidity.
- Reinvest your interest to enjoy better returns.
- Opt for a bank that lets you create and manage your deposits through its Internet banking channels.
- Use sweep-in deposits to earn higher interest on the money in your savings account.
- Consider tax-saving and conventional deposits to reduce the overall tax outflow on your interest income.
Conclusion
When to setup a term deposit? Make it a point to utilize this option from the moment you receive your first salary or income. Starting early will always help you enjoy a safe, stable, and profitable financial life.
