6 Reasons Why an FD is Better for You than a Savings Account
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6 Reasons Why an FD is Better for You than a Savings Account

  • Highlights

  • Boost your savings with proper fund management

  • Senior Citizens get higher interest per annum on FDs

  • Get Loan against Fixed Deposits for emergencies

  • FDs help you inculcate the habit of savings

Fixed Deposits and Savings Accounts are often seen as excellent instruments for parking surplus funds, because of the stability and safety they provide. However, when it comes to growth of your funds, Fixed Deposits offer higher growth and flexibility. Here are 6 reasons on why investors prefer FDs to savings account.

1) Higher rate of interest

When investing in fixed deposits, you can earn a higher rate of interest, which helps you attain better returns. Even with a short-term deposit of a few months, you can earn more than what you could if you left your money in a Savings Account. It can also help you beat inflation, which erodes the purchasing power of your money, as you can accelerate the growth of your funds.

2) No risks of market fluctuations

The returns of your Fixed Deposits remain unaffected by market fluctuations, so your hard-earned money remains safe. You can also use Fixed Deposit Calculators to determine your returns before you even start investing. This could help you plan your finances better, so you have a clear roadmap on how to grow your savings.

3) Higher interest rate for senior citizens

A savings account generally offers the same rate of interest for everyone, irrespective of their age. However, when it comes to a fixed deposit, senior citizens get higher interest of anywhere between 0.25% to 1% per annum. Thus, fixed deposits can go a long way in providing you with the much-needed financial support, so you can enjoy your post-retirement years.

Additional Read : 6 Common mistakes to avoid, while investing in FDs

4) Gain from periodic interest payouts

Unlike savings accounts, Fixed Deposits can help you gain periodic interest payouts so you can plan your expenses as per your convenience. Periodic interest payouts are most helpful in your post-retirement years when you need monthly income for catering to your regular expenses. If you are looking for regular interest payouts, you can choose a non-cumulative FD by selecting monthly, quarterly, semi-annual or annual payouts. Else, you can choose a cumulative FD which gives you the total interest earnings at maturity.

5) An FD promotes the habit of savings

Fixed Deposits have a fixed lock-in period, which limits the unnecessary withdrawal of your money until maturity. A savings account, on the other hand, enables you to withdraw any amount at any time, which proves detrimental to your goal of wealth appreciation.

As you are limited from easy access to your money, you end up saving more. This helps you benefit from the power of compound interest, which adds your earnings to your principal and helps you earn more money.

Loan Against Fixed Deposit

6) An FD can be tailored to your needs:

A savings account offers very little options to account holders. There are no variations in savings accounts and with the uniformity in interest rates, opening a savings account in one bank is just as good as opening it another bank. However, an FD can be of many types to suit your individual needs.

For instance, you can have a fixed deposit that is linked to your savings account, which is called a flexi deposit scheme. When the money in your savings account crosses a certain threshold, the surplus automatically spills over to a fixed deposit. This helps first jobbers invest surplus income with ease.

Secondly, you can choose between cumulative and non-cumulative FDs. If you want regular interest payouts, you can choose a non-cumulative FD selecting monthly, quarterly, semi-annual or annual payouts. Or you can choose a cumulative FD which gives you the total interest earnings at maturity.

As you can see, your potential to maximise your wealth and choose the option most suited to you is much more in an FD as compared to a savings account. Achieve financial freedom by investing in a Fixed Deposit that offers you high interest with utmost safety.

Bajaj Finance is now offering high rate of interest up to 9.10%*

*For senior citizens, on a cumulative scheme tenor of 36-60 months

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