It is a common practice in Indian households to keep aside a corpus in a child’s name shortly after s/he is born. It has been an age-old practice to open a fixed deposit in a child’s name mainly for the purpose of easily financing his/her education, among other major life investments. The notion of fixed deposits is usually passed down from one generation to another as a prudent way of securing one’s future in a way that’s resistant to external factors like market volatility.
Fixed deposit is an excellent way of securing your child’s future to some extent. While funding a child’s education back in the day wasn’t a massive investment, today we live in a time in which higher education can cost you a fortune, and for many simply unattainable. In such situations, a thoughtful investment like a fixed deposit made years ago can come to your rescue. In this post, let’s understand fixed deposits and how they work in detail.
Fixed deposit has remained a traditional hallmark of savings in India primarily because of its low-risk nature. A fixed deposit simply means a sum of money deposited for a specific duration. You can opt for a fixed deposit either through banks or non-banking institutions. When you open a company fixed deposit with Bajaj Finance for example, not only do you enjoy high credibility and safety, you can also benefit from a high interest rate, flexible tenure and a minimal investment amount. Fixed Deposit on Finserv MARKETS offers an interest rate of 8.60%, which can go up to 8.95% for senior citizens for tenures ranging from 12 to 60 months. Many financial organisations provide higher rates of interest for senior citizens, depending upon the terms of the policy.
Thus, the amount you’ve set aside grows steadily over time, and can be easily withdrawn upon maturity. Let’s understand how FDs work with the help of this simple scenario:
Suppose Ashish deposits an amount of Rs. 2 lakh for 60 months at say, 7.6% rate of interest. At the time of maturity, he’ll get an amount of Rs. 2,91,831. Now, Ashish can either can take the money out or renew the scheme for an extended period.
In an FD, this maturity amount will always be assured for Ravi regardless of the volatility of the market. This assurance makes fixed deposits so popular in our country, especially among those who want to invest their hard-earned money without having to risk their corpus. If you want to invest your money for the long haul so that your child can utilize that in the future, fixed deposit offers you the peace of mind where you can just invest the corpus and then not worry about other factors like market fluctuations in in the interim period. To make it clearer, let’s look at all the important factors that make FDs the best bet for your child’s future needs.
Safe returns: FDs are one of the safest ways of investing your money for the long haul with assured returns. When juxtaposed with other instruments like stocks, mutual funds and debt funds, FD is the clear winner as the others are affected by the market volatility unlike FDs. The fact that they provide guaranteed returns on your investments make FDs a great choice for investors who have a limited amount of money to invest.
Flexible tenure: Unlike PPFs, you have the choice to determine the tenure of your FDs. It comes with a minimum tenure of six months and a maximum of five years. This ensures that you safeguard your money and gain reasonable returns on it. There is also the option of opening multiple fixed deposits with different tenors to suit your financial goals.
Instant loans: During times of a financial emergency, your FD amount can act as the collateral and help you avail instant loans. You don’t have to prematurely break your deposit in order to finance your pressing needs. The maximum amount of loan is generally a certain percentage of the principal deposit. This varies across financial institutions. For example, on Finserv MARKETS, you can avail of a loan up to 60% of the amount invested in non-cumulative fixed deposits and 75% of the amount invested in cumulative deposits.
Flexible payouts: FDs allow you to select the term, and when the interest is credited to your FD account. You can choose between annual, monthly, or at-maturity payouts. FDs also offer higher interest rates for senior citizens. Bajaj Finserv FDs, for example, offer an additional interest rate of up to 0.25% (above the existing rate), for senior citizens.
Tax benefits: Fixed deposits also give you tax benefits while filing your returns. You can claim a tax benefit of up to Rs 1.5 lakh in a tax-saving fixed deposit account under Section 80 C of the Income Tax Act. The tax-saving fixed deposit has a lock-in period of a minimum of five years.
Forecasting your returns: You can also avail the benefit of instantly calculating returns on your FDs through an online interest calculator. You can easily use this simple and convenient tool by providing the amount to be deposited, the deposit term and the interest rate being offered. On Finserv MARKETS, you can use the Bajaj Finance Fixed Deposit online calculator to evaluate your returns before investing.
FDs available on Finserv MARKETS are undoubtedly one of the best and safest investment avenues you have in the market to secure your child’s future. While choosing an FD, it’s important that you get a high interest rate, as else, the very purpose of the investment fails. Being a company FD, these FDs ensure higher returns. Start investing today for your child’s future, so you can grow your savings easily and ensure a secure future for your child.