pnb housing
March 28th, 2019

Benefits of Fixed Deposit – Both Young and Senior Citizen

Blog Seprator

Fixed Deposits are one of the most preferred investment avenues for people of all ages especially senior citizens and parents of young children. The primary reasons being that it carries minimal risk and help in fulfilling both short and long term goals.

Senior citizens, especially retired persons, can enjoy interest on their deposits on monthly, quarterly, half-yearly or annual basis depending upon their requirements. FDs come with the option of auto renewal which facilitate the customers in hassle-free renewal of deposits. This allows re-investment of the initially invested corpus, helping them to continue with the regular income. It serves senior citizens with secured and guaranteed returns in their post-retirement years.

Let us understand with an example:

At retirement, most of the retirees receive a large sum of money in the form of gratuity, provident fund, arrears, etc. Instead of investing their life long hard earned money in risky instruments or parking those funds in a savings account, investing strategically in fixed deposit can help them earn a regular income. A dedicated income on monthly basis can help in meeting some of the regular requirements and unforeseen unavoidable expenses.

The below example is an illustration of a senior citizen who plans to invest retirement corpus of INR 20 lacs in FD.

Let us see how much money will be earned monthly through this investment:

Rate of interest (ROI)

8.4% p.a.

Principal (INR)

20,00,000

Term

5 years

Interest Earned (INR)

Total

Monthly

8,40,920

14,268*

Maturity  Amount (INR)

20,00,000

*The amount mentioned is for illustration purpose only and can vary as per ROI and tenure selected.

There are cumulative deposit options as well wherein the interest part is clubbed along with the principal amount, thereby giving a lumpsum maturity amount to the investors.

Parents can invest a sum of money to meet both short and long term goals for their children like their higher education, marriage, new skill trainings and meeting sudden and unexpected expenses. Parents can choose the tenure of the fixed deposit depending on when they actually need the maturity amount. More than one FD can be opened for different requirements, say one for higher education with a maturity goal of 10 years, another with a maturity of 2 or 3 years for near future needs.

Unlike investments in, say, mutual funds, there are no downswings in FD on returns. The interest rate offered at the time of opening FD will remain so till maturity and does not change basis economic volatility or company policies. For instance, a 2 year FD at 8% p.a. will continue to earn interest at that rate throughout the duration of the deposit.

For these reasons, a fixed deposit is the best investment option for earning regular income or building a healthy corpus, depending on your financial needs, as well as for meeting foreseen and unforeseen expenditure.

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