7 May 2021
Benefits Surrounding Fixed Deposits and Recurring Deposit

Benefits Surrounding Fixed Deposits and Recurring Deposit

Term deposits are a way of ensuring that the income or funds you have available can be used to the fullest extent. However, the choice between fixed and permanent deposits can seem overwhelming. They undoubtedly share similar characteristics, such as the interest rate and the return on investment to maturity.

But in addition to these features, there are many other benefits found in Money Morning that you can take advantage of based on your financial needs. So what is the difference in these so-called deposits?

Investments by investment amount

Each person has a different income. Some even have multiple forms of income. So how do you choose between a fixed or recurring deposit based on your income? First-time earners can invest in a permanent account for the first two years. This will not only help you adjust your investment in the event of an increase in income, but it will also help you instill an investment habit early on. Alternatively, if you have a large income where you don’t need cash for any immediate needs, you can go for a fixed deposit for any of your financial needs. While an RD account promotes savings and helps create a large reserve for a more secure financial future, FD accounts are the best option when holding free funds.

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What contribution arouses the most interest?

When calculating interest on both deposits, many factors must be taken into account. With the right strategy and rates, a fixed deposit will generate more income in the same account that the regular deposit is invested in. The difference lies in the composition theory. The more you save and the faster you save, the more interest you earn on the additional interest. While you can deposit a small amount monthly into your RD account, you will need to deposit a large amount up front in FD. Therefore, the percentage you earn will vary from month to month. One way to deal with this situation is to invest in an RD account and when the expiration date arrives, convert it to an FD account.

Investment property benefits

One of the main characteristics of a fixed deposit is that you will need to invest a fixed amount at a specific time during a specific year. However, if there is an emergency financial need, you may run out of funds if you invest in a fixed deposit. This will require you to destroy the escrow, which may incur penalties. However, a regular deposit will cover your liquidity needs, as you only need to invest your funds in this account in monthly installments.

You can take advantage of these benefits based on your financial requirements and your profile. With this in mind, you should choose the trust that perfectly suits your needs.