How to Grow Monthly Savings with Fixed Deposit?

Whether a retirement portfolio or future financial obligations, it is crucial for every earning individual to set aside a portion of their monthly income to address such situations conveniently. Not only it helps in building substantial corpus over time, but also inculcates disciplined savings in an individual.

Financial Planning Tips and Fixed Deposit

The Indian financial market offers several options to facilitate the same, such as a systematic investment plan. However, since it is a market-dependent instrument, the associated risk of losing out on accumulated corpus is high. Thus, to maximise gains in a safe environment, it is best to invest in a Fixed Deposit.

Why Should you Invest in a Fixed Deposit?

A fixed deposit is one of the most convenient savings tools for individuals from all walks of life. Investing in FD helps in protecting your savings, especially amid high market volatilities and the current economic downturn.

A fixed deposit enables you to plan your investments, as per your goals, so you can grow your savings with flexible tenors and high safety. You can choose your tenors, and also the frequency of your interest payouts. Additionally, you can use the Fixed Deposit interest calculator to determine your fixed deposit return and help you calculate FD maturity amount, even before you start investing.

Thus, FD works for all investors, regardless of their risk type. However, since it requires a lump sum deposit, individuals willing to open an account need first to accumulate the necessary corpus. It might not be feasible for individuals who are just starting their career to utilise their accumulated corpus to meet a sizeable monetary obligation.

Systematic Deposit Plan (or SDP) by Bajaj Finance is designed to meet the wealth-creation requirements of such customers. It is a quick savings tool wherein an individual can make monthly deposits into a fixed deposit account. Each such deposit is considered individually and earns interest at the rate prevalent on that date. Similarly, each deposit will mature independently of the other deposits.

An individual willing to mobilise his/her savings through a Systematic Deposit Plan can use an SDP calculator. This tool helps individuals to assess the interest they earn beforehand, which will aid them to deposit more strategically.

All You Need to Know About Systematic Deposit Plans

Here are a few pointers that distinguish the Systematic Deposit Plan from other monthly deposit schemes or savings tools offered by the Indian financial market –

1. Low Deposit Amount

An individual can start their Systematic Deposit Plan for a minimum amount of Rs.5000. Therefore, it eases the burden of accumulating a lump sum amount and facilitates substantial wealth creation over time.

The number of monthly deposits an individual can make is also flexible, ranging from 6 – 48 for a tenor of 12 months – 60 months. He/she can choose any number of deposits depending on short or long-term financial obligations.

2. Assured Earnings

Each deposit earns interest based on the prevalent rate on the respective date. Nevertheless, interest each deposit accrues remains constant throughout the maturity period, unlike in a systematic investment plan, where the rate of return fluctuates based on market conditions and hence, does not pose any certainty of earning for the concerned investor.

The following table elucidates further how systematic deposit plan works –

Deposit (Rs.)No. Of DepositsTenorInterest rateInterest accrued monthly (Rs.)Total amount (Rs.)Total interest earned (Rs.)
5,0001224 months7.65%79469,5289,528
5,0002436 months7.7%12461,49,90429,904
10,0001224 months7.65%1,5891,39,06819,068
10,0002436 months7.7%2,4922,99,80859,808

Senior citizens depositing through Systematic Deposit Plan are eligible to earn higher rates of interest, akin to a traditional fixed deposit account.

An illustration for the same is given in the table below –

Deposit (Rs.)No. Of depositsTenorInterest rateInterest accrued monthly (Rs.)Total amount (Rs.)Total interest earned (Rs.)
5,0001224 months7.9%82169,8529,852
5,0002436 months7.95%1,2901,50,96030,960
10,0001224 months7.9%1,6421,39,70419,704
10,0002436 months7.95%2,5803,01,92061,920

Individuals can use an SDP calculator before deciding on the amount, number of deposits, and tenor to maximize their benefits.

3. Ease of Depositing

The first payment in a Systematic Deposit Plan shall be made through an account payee cheque. From thereon, the subsequent payments would be automatically debited by the respective financial institution from the depositor’s account.  Therefore, individuals do not need to assume the hassle of periodical payment, while at the same time enjoying the conveniences of systemised wealth accumulation.

A depositor would only need to produce a NACH mandate that authenticates the automated payments.

Account holders can also choose to withdraw their accumulated corpus prematurely. Such withdrawals will be subject to Reserve Bank of India (RBI) regulations.

4. Simple Documentation

To open an FD account through Systematic Deposit Plan, an individual only needs to submit his/her KYC documents alongside cheque for the first payment and a NACH mandate.

5. Loan Against Fixed Deposit

As an alternative to premature withdrawal, depositors can opt for a loan against their accumulated corpus to meet any immediate financial obligation. This feature allows individuals to ensure their FD account continues earning interest. Hence, the Systematic Deposit Plan poses as a formidable option for individuals, who want to save well for their future without straining their present financial position. Compared to a systematic investment plan, it guarantees assured returns even during a market crash.

Author Bio:

Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.