A rundown on how you can save money by investing in fixed depositsby Divya Kapoor Finance Advisor
Saving money is essential if you want to create a corpus for your life’s financial goals. When you save regularly in interest yielding investment avenues, your savings grow over time. Thereafter, when you need money for meeting your financial obligations, you have your savings to utilize to easily and you can easily meet your financial requirements. While saving is necessary for creating a corpus, choosing the right investment avenue is also necessary to ensure that your savings grow. A fixed deposit scheme is one of the most popular investment avenues for growing your corpus. Let’s understand why -
A fixed deposit scheme is one wherein you deposit a lump sum amount for a fixed period of time. The amount grows at a rate of interest which is specified at the time of deposit and is guaranteed throughout the period of investment. When the term of deposit comes to an end you get a lump sum amount which contains the amount that you deposited as well as the interest which was earned during the period of deposit.
Advantages of fixed deposits
Fixed deposits have various advantages which makes them a good investment choice. These include the following –
They promise a guaranteed rate of return which does not depend on market volatility and provides stable returns
If you want regular incomes you can also choose to avail the interest earned from your fixed deposit as income pay-outs
Your fixed deposit can act as a- collateral if you want to avail a loan
You can also avail a credit card against your fixed deposit as banks and financial institutions have various credit card schemes which are offered against a fixed deposit of a minimum value
You get better returns from fixed deposits compared to those promised by your savings bank account
If you invest in 5-year fixed deposit schemes, the investment that you make would qualify as a deduction from your taxable income up to INR 1.5 lakhs under the provisions of Section 80C of the Income Tax Act.
How fixed deposits help in saving money?
Given the above-mentioned benefits of fixed deposits, it is clear that the deposits are an attractive investment avenue for many investors. They also help you in saving money in the following manner –
Since fixed deposits have a fixed tenure, they ensure that your savings remains undisturbed during that period. When the savings remain undisturbed, they earn higher interest rates and grow into a considerable corpus.
Fixed deposits also help in creating forced savings
Since they provide guaranteed interest rates, risk-averse individuals find fixed deposits to be the best investment avenues and it motivates them to save and invest in them.
Tax saving fixed deposits help in saving your tax liability. By investing in such tax saving deposits you can lower your taxable income and pay a lower amount of tax. As your tax is saved you have a higher disposable income which leads to higher savings
So, fixed deposits are a good way to save money and they also give various advantages to investors. If you are also looking forward to saving your hard-earned money in a guaranteed investment instrument, choose fixed deposits.
Created on May 15th 2019 02:09. Viewed 237 times.