Recurring deposits are the best financial instruments available to consumers in terms of simplicity andgrowth. Because of the similarities between recurring deposits and fixed deposits, many people often remain unaware of the advantages that a recurring deposit offers. These instruments are like a piggy bank that pays you to save your money.
Recurring deposits offer the same rate of interest as a fixed deposit and the interest earned is taxable. In a recurring deposit, you have to deposit a fixed amount of money every month, and the interest is calculated quarterly. Even if an FD will earn you more money on maturity, here are four reasons why you should consider an RD:
Monthly investment: An RD blocks your money and forces you to save more and spend less. In an RD, you are committed to deposit a certain sum every month, so it inculcates a saving habit.
Safety of the principal amount: Your money is safe and you earn a healthy interest. This is by far the best financial instrument for meeting short-term needs, as money placed in other instruments such as equity only multiplies over a longer term.
Ideal for beginners: If you have only just started with your professional life and you are in the initial stages of making inancial goals, then a Recurring Deposit is an ideal instrument for you. It allows you to develop a resource pool from which you can invest into other instruments.
Easy entry and exit: It is very easy to open a Recurring Deposit, and you can start with as less as Rs 100 a month. You can withdraw the amount collected anytime, and though it will attract minor charges, withdrawals are easy. This is ideal if you want to maintain liquidity.
Recurring Deposit Accounts are mostly ignored because of the popularity of Fixed Deposits. Though FDs generate more income in the longer term, RDs offer you freedom and an easy-to-inculcate savings habit. This market instrument is ideal for people of all financial backgrounds. If you are looking at making short-term investments, then considering an RD can be ideal for you as these instruments offer a healthy rate of interest along with security of the principal amount.
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