Fixed deposits are considered one of the best ways for you to start investing. They help you earn interest over a fixed term, and are thus also referred to as time deposits and term deposits. However, you can’t withdraw from this account until after it matures. This is the best way to increase your money within a relatively short span of time, compared to any conventional savings accounts.
There are several advantages of opening a time deposit account. Some of them are listed below:
- Time deposits promise higher rate of interest
- You can choose the tenure for investing in a time deposit
- Time deposits assure you returns
- Time deposits act as a steady income source
- Time deposits can be easily withdrawn
- You can invest in several fixed deposit accounts with different tenures
- Time deposits have flexible interest rate payouts
- Time deposits inculcate the saving habit in you
- Time deposits act as a risk managing instrument
- Time deposits act as a secured last resort
Compared to other savings accounts, term deposits guarantee higher interest rates, thus maximising your earnings. You can invest a minimum amount, and still earn a good return investing in a fixed deposit. Your return will be better if you choose a longer duration for investing in a fixed deposit.
Time deposits also offer you with an array of options for your investment tenure. You can choose a month if you want to, or let your term deposit mature after 10 years. The tenure you decide to choose may depend on the bank you want to invest with.
Fixed deposits come with guaranteed returns and you don’t have to worry about the safety of your investment. Prior to you depositing an amount, banks offer you a quote and an interest rate that matches the exact figure of your return. Besides, it offers more security on your return compared to investing in the stock market.
Fixed deposits provide you with stable earnings. You can set up the account so that the interest earned is returned to you on a monthly, quarterly, or yearly basis. You can also choose to deposit the earnings to another account, without having to touch the initial fixed deposit.
Often you might be faced with situations needing immediate financial emergency. Fixed deposits give you the option of withdrawing the amount at any point in time. However, the facility comes at a small penalty.
You might have a set of goals on why you wanted to invest in a term deposit account. Time deposits give you the opportunity to meet different requirements by splitting your money and investing in several accounts. Besides, each could be earning you a return at a different rate.
Term deposits also give you the option of earning interest on the amount deposited at different time intervals. You can earn at maturity, or on an annual or monthly basis. You can be assured of the extra income flow when you earn interest on a monthly or annual basis.
When you deposit your money in a fixed deposit, your amount is saved in that account for a significant span of time, unless you decide to withdraw it because of an emergency situation. But, in other scenarios your term deposit amount stays in your account as a saving, until maturity.
Financial instruments such as unit trusts and ILPs promise you high return on your investment, but they are generally volatile in nature. Fixed deposits are considered more safe in that aspect as they not only eliminate the risk surrounding volatility, but they also help planning for future goals.
Term deposits act as the last secured resort you could count on any point in time. You can withdraw the amount before maturity in case you need emergency money. You can even pledge the fixed deposit as a collateral and get small secured loans or overdrafts whenever you are in need of money urgently. You can even count on it as a financial resort post retirement.