Every employee waits for the time of the year when their offices start handing out bonuses. Apart from the salary hike, the bonus is another source of income that can help you reach your financial goals. However, it is important that you know how to use this money properly to secure your future.
Investment is the smartest way to grow your money, and a fixed deposit (FD) is one of the best and safest investment instruments. Many people believe that any extra money should be spent on momentary pleasures. However, you must consider using it more effectively and grow your fortune.
An FD is a great investment channel that can help you with your long-term financial goals. There are many different investment options available today but an FD is an ideal avenue if you are looking for a perfect balance of returns and security. It offers you better returns and helps you become more financially secure.
How do FDs work?
The FD interest rates depend on the tenure of the fixed deposit. FDs have a very simple principle; they provide you with a fixed income while making sure of lower investment risk. When you invest in an FD, you make sure that your hard-earned money is safely kept in a scheme while it also grows in value and provides you with assured returns. It is also a very flexible investment option.
The interest rates offered on the FD can vary from one financial institution to another. Reputed financial providers offer FDs up to 9%. The flexibility comes in the form of investment tenure. The duration can range from a minimum period of twelve months to a maximum tenure of sixty months.
The fixed deposit interest rates allow your investment to grow significantly. The interest accumulated from a long-term investment is higher compared to a short-term FD. You can also get tax benefits from the FD investment if you keep the money in the FD for more than five years. This is why a long-term investment plan is always better.
Why should you invest in an FD?
Before you start investing in an FD, you should learn more about the different features of FD. This will help you make the right investment calls. Listed below are a few salient features that would encourage your bonus income in an FD.
- The FD rates are higher compared to most of the other investment options. This way your bonus is guaranteed to grow higher.
- FDs have a flexible tenure. You can invest your money with a reputed financial institution for a period ranging from one year to five years.
- FDs have a fixed maturity date. If you ever need to withdraw the money before the tenure ends then you will have to pay a penalty. Hence, FDs encourage investment discipline.
- The FD rates in India are fixed once you invest in a scheme. Any future changes in the interest rate will not affect your returns. This option makes FD a safe investment tool, as your investment is not affected due to any market volatility.
- The money you invest in an FD contributes to the economy of India
Any money sitting idle in your savings account does not significantly contribute to your financial goals. FDs are the most secure investment instrument, as they help you to develop a good investment habit.