Talking about the simplest financial product provided to us by the banks we have a very simple type of deposit known as the recurring deposit. A Recurring Deposit which is also known as RD is a specific type of term deposit which is offered by the banks to their customers. This is a type of investment in which the investor if he can, deposits a definite sum of money after every regular intervals to in turn get good return on their investment. The RD basically consists of the recurring or the regular deposits and the component of the interest which provides flexibility to the customer to operate his account.
The basic features of the recurring deposit are as follows:
- It makes the habit of regular savings coherent to the investor.
- The rate of interest is higher than any other regular investment scheme.
- The minimum investment may start from Rs 10 and may differ as per the norms laid by the bank.
- The minimum limit for investment is 6 months and may vary as per the rules of the bank.
- It can be terminated anytime if need be by the investor. There is a minimal penalty.
- It can be used as collateral for loans and about 80-90% of the amount insured can be taken for loan.
- The deposition of the amount on maturity can be as per the investor wishes, be it in one sweep or monthly instalments like pension sort.
To calculate how much money you invested in RD, you can use this recurring deposit calculator.
The tips for saving money using recurring deposits are:
- List out the essential goals for the upcoming time period for eg. You have to buy a phone, gift your parents a vacation, or join a course of creative learning. Determine the amount that will be required and the time when it will be required. Open recurring deposit accounts for that particular period and amount and thus the money is getting saved and not being spent on useless things and on top of that it is earning an interest at a very high rate.
- When the habit of regular saving has been inculcated then the recurring deposits of long term can be taken and the maturity amount obtained from the RD should not be used carelessly and work should be done which are helpful financially.
- Chose a time period after which you might need money and determine an approximate value of the amount needed. Choose any option from the various recurring deposits that are made available by the various banks. Invest the money you can afford without putting yourself under extra financial burden regularly as specified by the recurring deposit norms.
- The maturity value of this recurring deposit can be used as investment for another recurring deposit which has a longer time period in terms of periodicity. Thus a long term recurring deposit can be handled by investing in small recurring deposit which seems easy to the
- The maturity value of the Recurring deposit can be used for many purposes it may be used to acquire assets which generate a profit or it can be used as a pension sort scheme to cater to your daily need and the present income can be used in further saving or investment.