How does a fixed deposit help in a financial emergency?
For prudent investors and those new to investing, saving is synonymous with Fixed Deposits (DF). Although not a new instrument, Fixed Deposit is a popular investment choice due to its high safety quotient, especially for those who prefer to invest for the long term.
When you plan to invest, asset allocation is important. Asset allocation is a process of dividing your money and investing in stocks, bonds, and treasury instruments based on your risk appetite and time horizon. Term deposits are a key part of your cash asset allocation for immediate liquidity and financial urgency.
At the start of the pandemic, many families faced financial uncertainty as individuals faced job losses, pay cuts, etc. As India battles the second wave of the pandemic, people may need to dip into their savings to meet unforeseen expenses.
Here are five main benefits of having a fixed deposit to get through tough times:
Types of occupancy
In terms of tenure, many options are available to you. Banks offer variable interest rates depending on the duration of the FD. Usually, the longer the tenure, the higher the interest rate on the deposit. Digibank by DBS offers FDs with terms ranging from 90 days to five years. So, depending on your anticipated fund needs at a future date, you should choose an appropriate duration!
FD comes with a certain degree of financial flexibility. In an emergency, you can always choose to withdraw the deposit early, which will be instantly credited to your savings account. The bank may sometimes charge little or no penalty fees for premature withdrawals.
Bank term deposits are among the safest investment options available to those who fear market volatility. You also don’t have to worry about interest rate changes since the rate will be fixed for the term of the deposit, providing guaranteed returns to the investor with no fluctuations.
This makes FDs a great option for instilling the habit of saving at an early age, as the investor can experiment with amounts and durations depending on their needs.
This is another advantage of having a fixed deposit. All bank deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a limit of INR 5 lakh. Thus, your money is insured up to 5 lakh INR; this applies to every FD you hold and is another safety net associated with FD. Insurance guarantees protection of all of the depositor’s money.
Easy to open
Opening a fixed deposit these days is the easiest thing and doesn’t involve any paperwork or tedious processes. With technological advances in the banking world, you can open your fixed deposit in minutes via a mobile or laptop from the comfort of your home. You can even set your FD amount based on your personal financial goal.
A fixed deposit is your best friend on a rainy day. Investing in a FD ensures that the money is not spent on frivolous needs, but there is assurance that it is available in an emergency. Plus, it’s very liquid, and if you decide to withdraw early, you can get the money deposited into your savings account quickly.
Now that you have all the information you need about FD, you can open one without hesitation and realize its potential to the fullest.
by Asheesh Jain, Head, Investment & FX Business, Consumer Banking Group, DBS Bank India