Protect your savings with Fixed Deposit

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Keeping cash in their homes is a normal part of the financial habit of most of the Indian families. There are, however, always dangers of keeping a large amount of money in your house from the viewpoint of the safety hazard. Along with that, you also lose the purchasing power of money kept idle in your homes. Therefore, depositing your money in a bank account is an option one must consider especially as an emergency fund for the financial crisis. While a lot of people prefer to keep cash in their Savings Account, investing the same money in an investment scheme like a fixed deposit can help to grow your savings at a higher rate.

The need for protecting your savings

The study conducted by the Centre for Monitoring Indian Economy (CMIE) reveals that 84% households have suffered a decline in monthly income in the backdrop of impacts of COVID 19 financial and economic distress like job layoffs and pay cuts. To tackle the crisis, the government has taken significant steps to provide relief to the common man. Some of the relief measures include Moratorium on loan products and credit cards, reduction in TDS rates, the contribution of EPF, extending deadlines for ITR and GST filing and reduction in Repo Rate etc. However, considering the scale of the crisis, these measures are also not sufficient to survive. Thus it is crucial to managing your hard-earned money by carefully planning and choosing the investment instrument.

Where should you invest your money?

In the current economic scenario investing money in a different small investment, schemes can be a good idea. To get better returns, one can diversify their investments; however, investing your money with fixed assured instruments would be a much better idea. One can invest in multiple options like FD( Fixed Deposits), PPF(Public Provident Funds) and NPS(National Pension Scheme) etc.

Protecting your savings with Fixed Deposit: With the declining Repo Rate, there has also been a reduction in FD rates of the primary public sector as well as private sector banks. However, FD can still be the right choice for investment due to the following reasons.

What is a fixed deposit?

A fixed deposit, provided by public and private sector banks, small finance banks, non-banking financial institutions and post offices, gives flexible tenure to investment along with assured returns on investment for the entire tenure. The mandate of FD ranges between 7 days to 10 years.

Benefits of investing in a fixed deposit:

  • A fixed deposit provides higher assured returns than a regular savings account.
  • To get tax benefits, one can invest in Tax-saving FD of 5-year tenure.
  • The rate of returns are determined as per RBI guidelines and are not affected by market volatility.
  • One can open an FD account in a single or joint mode of holding.
  • You can also get a loan against FD at 1%-2% higher rate of interest than FD.
  • For investments upto Rs. 5 Lakhs your funds are insured.

How to grow your savings with FD in the present scenario?

  • Look for investments that provide good returns as well as safety. You can invest in smaller FD upto Rs. 5 Lakhs to get insurance cover.
  • Invest in shorter FDs of upto 1 year to get better returns.
  • Don’t invest your entire money in single money for getting tax benefits and to minimize any losses.
  • Don’t break your earlier FDs.

The bottom line: Before investing your money you must carefully check the financial health of the lending institution, and it would be a wise idea if you don’t invest your entire amount/ savings in a single FD. Also, you must look beyond banks and consider thinking about Fixed deposit instruments of small finance companies to get better returns on your investments.

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