Ensuring your child’s financial security is paramount for every parent. To protect their aspirations and dreams, many rely on the stability of Fixed Deposits (FDs). FDs, available through banks and non-banking financial institutions, guarantee returns on investment while safeguarding the principal amount.
Moreover, they offer a reliable avenue to finance future expenses, such as educational goals. Shielded from market volatility, FDs provide peace of mind with guaranteed returns and steady capital appreciation. In this blog, we shall discover the procedure for opening an FD for minors, fixed deposit benefits, FD rates, etc.
What is a Minor FD Account?
A minor FD account is a fixed deposit account held in the name of a minor, typically managed by a parent or guardian on behalf of the child. In this type of account, the minor is the primary account holder, and the parent or guardian acts as a joint holder or custodian until the child reaches the age of majority. The features and terms of a minor FD account may vary depending on the banking institution and local regulations. However, some common characteristics include:
- Age Requirement
- Legal Guardian
- Documentation
- Withdrawals and Deposits:
- Maturity
- FD Rates
A minor FD account provides a secure way for parents or guardians to save money for a child’s future, with the added benefit of earning interest on the deposited funds.
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Types of FD Accounts
Fixed Deposit options for minors offer parents two clear choices.
- Conventional Fixed Deposit: Enjoy the flexibility of acquiring FD interest regularly, either yearly, Half Yearly, quarterly, or monthly. Tailor the payout frequency to align with your financial objectives.
- Reinvestment Option: To steadily raise your savings, opt for a cumulative fixed deposit with autorenewal on maturity. This option automatically reinvests the accrued interest into the principal amount. On maturity if investor decides to withdraw the FD, you get the total sum with earned interest.
Fixed Deposit Benefits and Features
Stable Returns: Fixed deposit accounts provide a fixed interest rate over a predetermined period, ensuring a predictable and stable return on investment.
Safety of Principal: The principal amount invested in a fixed deposit is secure and protected, offering peace of mind to investors.
Guaranteed Returns: Unlike other investment options subject to market fluctuations, fixed deposits offer guaranteed returns, making them a reliable investment choice.
Flexible Tenure: Based on their financial goals and requirements, investors can choose the tenure of their fixed deposit, ranging from 12 months to 60 months.
Liquidity Options: While FDs are intended for a fixed tenure, NBFCs offer options for early withdrawal subject to certain penalty on interest as per NBFC Deposit acceptance guidelines or loan against the fixed deposit, providing liquidity in times of need.
Diverse Customer Base: Fixed deposit accounts are accessible to a wide range of individuals, including minors, senior citizens, and non-resident Indians, making them inclusive investment options.
Easy Application Process: Opening a fixed deposit account is simple, requiring minimal documentation and no prior investment knowledge.
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Opening Minor FD Account Explained
To initiate the procedure of opening an FD for your child, follow these straightforward steps:
- Access Your Account: Log in to www.mahindrafinance.com. Navigate to the FD Form section to commence the procedure.
- Choose Investment Amount & Tenure: Select the preferred investment tenure and amount suitable for your child’s needs and financial goals.
- Customise Your Payment Plan: Personalise your payment plan depending on your choices and requirements.
Importance of FD Accounts for Minors
Foster Early Savings Habits: Encourage the development of financial responsibility and security by instilling the habit of saving from a young age.
Teach Delayed Gratification: Introduce the concept of delayed gratification and the importance of setting aside money for future goals through instruments like Fixed Deposits.
Cultivate Discipline and Patience: Early exposure to saving helps cultivate discipline, patience, and a sense of control over finances.
Boost Confidence and Achievement: Witnessing their investment grow over time boosts children’s confidence and fosters a sense of accomplishment in managing money wisely.
Educate on Banking Principles: Fixed Deposits help parents educate children about banking principles and FD rates to enhance financial literacy.
Lay Foundation for Financial Well-being: Opening a Fixed Deposit at a young age establishes a foundation for lifelong financial well-being and independence.
Financial Independence: By building a savings habit early on, children learn to become financially independent and make informed decisions about money management as they grow older.
Compound Interest: Through compounding, the interest earned on FDs is reinvested, resulting in higher returns over time, making it an attractive option for long-term wealth accumulation.
Final Word
Opening a Fixed Deposit account for minors is a wise investment decision that can provide long-term financial benefits. By following the steps outlined in this guide, parents can take the necessary steps to secure their child’s financial future and instill valuable money management skills from an early age.
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