Investments are integral to wealth building and are significantly influenced by time. The longer you remain invested, the better or higher the returns you can expect, depending on the investment. Fixed deposits (FDs) are no different. They are among the most popular low-risk investments that offer stable, assured returns. Given that the interest remains fixed for the deposit tenure, a strategically timed investment done early can help boost your efforts towards wealth building. Let’s look at some benefits you can enjoy by starting an FD early and how it can help you save towards your goals.
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Encourages Saving
A fixed deposit requires you to set aside a chunk of your income as an investment. This practice can help inculcate the habit of saving regularly, which, in turn, can provide you peace of mind that you are working towards securing your future.
Benefit Of Compound Interest
Compound interest is crucial to investing and refers to interest that is calculated on the principal and interest accumulated over time. This means that the earlier you start your FD, the longer you must get the benefit of compounding on your investment. For instance, by investing a small amount in a long-term FD at the start of your career, you can get significant returns once it matures. Compared to this, a short-term FD started later in life may not yield similar returns.
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Risk-free, Stable Returns
Fixed deposits, unlike other investments, are not tied to market performance. As a result, they provide assured and stable returns which you can calculate at the start of your investment.
Easy Access In Emergencies
Emergencies strike unannounced but an FD can act as a safety net providing easy access to funds. Many banks offer loans against FDs and allow investors to withdraw from the FD in an emergency. These options go a long way in facilitating easy access to funds when you most need them while ensuring that your investment remains largely unaffected.
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Maximised Tax Saving
Tax-saving FDs are a type of fixed deposit that offer tax deductions of up to Rs.1.5 lakh p.a. under Sec 80C of the Income Tax Act. The tax-saving feature of these FDs allows you to reduce your taxable income. Over a longer period, these savings can be significant and be redirected towards other financial goals.
So, here are some benefits you can enjoy by starting an FD early. If you are planning on starting one, here are the latest interest rates being offered on 1-2-year FDs by leading private banks.
| Bank | Interest Rate (1-2 years) |
| RBL Bank | 8.10% |
| Bandhan Bank | 8.05% |
| DCB Bank | 8.05% |
| IndusInd Bank | 7.75% |
| IDFC Bank | 7.75% |
| TNSC Bank | 7.75% |
| Yes Bank | 7.75% |
| Catholic Syrian Bank | 7.75% |
| Tamilnad Mercantile Bank | 7.50% |
| Karnataka Bank | 7.50% |
Data as on respective banks’ website on 22 Nov 2024; For each year range, the maximum offered interest rate is considered; interest rate is for a normal fixed deposit amount below ₹1 crore
