Life is so unpredictable. Saving for a rainy day is a must. By doing so, in a slow and steady manner, you will one day reap the fruits of your persistence and foresight. The government of India has been launching many schemes for the small scale investors. They facilitate savings in a very easy and planned manner. The RD or a Recurring Deposit is one such saving module which is very popular anybody wanting to save up for a rainy day. It doesn’t take a genius mind to understand it benefits and usefulness. Read on to know more about it –
7. Small savings add up to big results
An RD is very similar to a FD or a fixed deposit, in the sense that we deposit money in both for a specified period of time and get a fixed rate of interest on it. In very simple terms it is like a FD that you make every month. After a lock in period that could be from 6 months to 10 years, you add up a hefty fixed amount that you receive on maturity along with a good amount of interest income added to it.
6. Risk free, tax free savings
Your money is very safe in a RD, as there are no risk factors associated with it. The money is never invested in any market related schemes, so it grows slow and steady. It might not double, but will keeping growing to the last day of the maturity period, for sure. Another great facility that is offered on a RD is that there are no Tax Deductions (TDS) on it. So you don’t need to worry about losing any of that interest that your RD has earned for you.
5. Come handy to meet future expenses
Most people, generally women, open an RD account when they anticipate foreseeable expenditure. It is a great option for pre planning and avoiding expenses that pinch the pocket when one is least prepared for it. A child’s marriage or buying property are most common reasons for which people save up by opening a RD account. The fact that over time it become a habit because one has to compulsorily save to keep the account alive, you learn to plan your budget and save a little every month.
4. An RD inculcates the habit of saving regularly
The government has introduced savings plans in the market, in order to develop a habit of saving amongst its citizens. Some of the RD schemes only require a deposit of ten rupees at regular intervals, in order for the account to remain active. The depositor has the option of choosing a term period of 6 months to almost ten years. The rate of interest offered is higher than that of a normal savings account in the bank.
3. Temptation of withdrawing money from RD account is restricted
Banks do provide the facility of opening a savings account but it differs from a recurring deposit account. Where you can withdraw money from a savings account anytime, one cannot do so with a RD account. In RD accounts you will not be able to make any withdrawals till the term period is completed. However, if the depositor needs money urgently, he or she can close the account or take a loan against it. One should try not to do that as you stand to lose interest.
2. In times of need, provides loans of easy terms
Most financial institutions where you have opened an RD account will allow the investor a loan of upto 75% on the accumulated amount that stands already deposited in the account. In other words one should not feel that the money is locked in for a long period, but you can avail it should circumstance compel you dip into your own savings.
1. RD Account is the easiest one to open
Other than banks, non-banking financial institutions RD accounts can even be opened in Post Office. The country has a well laid out network of Post Offices in the country which are backed by Government of India. Given the access on has to post offices and other financial institutions including banks an RD account is the easiest to open and bring you into a scheme that helps to save your own earnings on a regular basis. A RD Account suits the needs of people from all ages and can be used for meeting many needs, which include:–
- For meeting any emergency
- For your retirement
- For your dream home
- For a long vacation
- For a new car
- For the education of your child