Fixed Deposits ” A Woman Investor’s Safe Investment Choice “

Once a husband asked his wife to check his ‘balance.’ She walked to him and gave him a big ‘push’ to check his balance. Shocked, the husband replied balance as in ‘Account Balance.’ 

Perhaps, today’s women know it well what ‘balance’ means but still there are many financial concepts and products that are still unknown or less known to women. Any women striving to enhance their personal finance knowledge aiming financial independence, must learn these financial products and jargon related to them. This blog will talk about FD, which is Fixed Deposits. It is a great and safe investment product for risk-averse women investors.

Fixed Deposits

A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date.

  •  They are considered to be very safe investments.
  •  The longest permissible term for Fixed Deposits (FDs) is 10 years.

Benefits of Fixed Deposits :

  –  It encourages a savings habit as the money you deposit needs to be in the account for a period of time without you making any withdrawal.

  –  Investing in a fixed deposit account earns you a higher interest rate than depositing your money in a savings account.

  –  You are assured of returns for your investment

  –  The account helps to act as a fall back for your business in the event of a cash flow squeeze or can be used to meet your future cash requirements.

  –  Interest is payable at maturity; annually or monthly depending on the term you chose or you could use the money to buy assets if you want.

  –  You get to choose how long you want to invest your money in a fixed deposit account ranging from 30 days to ten years.

  –  You can choose to have more than one fixed deposit account if you want to save for different goals.

Major Types of  Fixed Deposits :

1. Regular Fixed Deposits

–  You deposit your money with a bank for a fixed time period called tenure of the fixed deposit.

–  You get a higher interest on the money which you deposit in your fixed deposit than in a savings bank account.

  –  On maturity of your fixed deposit you are paid back your principal with interest. You are not supposed to touch the money in the fixed deposit for the time you make the deposit.

  –  If you are in urgent need of money you can break your fixed deposit (withdraw money from your fixed deposit).

  –  You have a penalty of 0.5-1% lower interest on your fixed deposit than promised if you do so.

2. Flexi Fixed Deposit

  –  In Flexi Fixed Deposit your fixed deposit is linked to a savings bank account. Your money moves between fixed deposit and savings bank account.

  –  Flexi fixed deposit is also called the sweep in – sweep out fixed deposit.

  –  You deposit INR 2 lakhs in a flexi fixed deposit and your bank pays you an interest of 8.5% compounded quarterly.

  –  There is a sweep in of money to your savings bank account and a sweep out of money from your fixed deposit.

3. The 5 year tax saver fixed deposit

  –  You enjoy a deduction of INR 1.5 lakhs a year under section 80 C of the income tax act if you deposit your money in a 5 year tax saver fixed deposit. Not all fixed deposits enjoy section 80 C benefits.

  –  You have to invest your money in a 5 year tax saver fixed deposit to avail the tax saving benefit.

  –  This fixed deposit is non callable (you cannot break the fixed deposit before 5 year).

  –  The interest paid to you on the maturity of the fixed deposit is taxed as per the income tax slab you fall under.

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