The uncertainties of life are enough reasons to save money for the rainy days, but it isn't just about setting aside funds. It's about how you make your money work for you, which can easily be achieved by automating your savings. Automated contributions can help accumulate wealth and reach your financial goals without much stress. However, achieving this requires time and a strategic approach, such as investing in a Recurring Deposit.
What is a Recurring Deposit?
An RD is a risk-free term deposit in which you invest a fixed amount monthly for a predetermined period, usually 6 months to 10 years, to build a corpus. Unlike lumpsum investments in Fixed Deposits, an RD allows you to save in small, regular instalments, resulting in consistent growth through compounded interest. For example, Axis Bank RD can be started with investing just ₹500 monthly.
Key benefits of automating your savings with RDs
1. Build a habit of saving: Investing in RD can help you build the discipline of savings that eventually turns into a habit. Automated transfers help create a barrier between your disposable income and your savings. You can effectively adjust your expenses based on the funds that's left after the transfers. This ensures that your hard-earned money is simultaneously accumulating and growing.
2. Offers consistency: Automating your savings with RDs ensures consistency. If you set up an auto-debit from your Savings Account, the amount is deducted automatically and you are less likely to skip a month or spend the money elsewhere.
3. Offers flexibility to achieve your goals: RDs offer flexibility in terms of tenure and monthly investment amounts that can help you achieve both short-term and long-term goals. You can choose a short-term RD ranging from six months to one year, medium-term tenure of 1-5 years, or long-term tenure of 5-10 years. You can use the RD calculator to estimate the returns and then choose the suitable tenure and amount.
4. Safe from market volatility: The Recurring Deposit rate is fixed when you open one and stays fixed throughout its tenure. You can be assured you get the same rate and returns irrespective of changing market trends or any change in the interest rates. This brings stability to your savings.
Also Read: Exploring different types of Recurring Deposit (RD) Accounts
Setting up an automated Recurring Deposit
1. With digital banking, you have the option to open an RD online or by visiting your bank branch.
2. You need to login to your Internet Banking and navigate to the section of investments and deposits.
3. Choose the option for a Recurring Deposit and select the right tenure and the monthly deposit amount.
4. To automate your savings, enable the auto-debit feature. You will have to specify the Savings Account from where the specified amount will be deducted every month and credited to your RD account.
5. Review your choices and confirm the details. Your first instalment will typically be deducted immediately, with subsequent deductions occurring on the same date each month.
Automating your savings with Recurring Deposits is a hassle-free way to ensure you save consistently. With the benefits of earning interest and the security of guaranteed returns, RDs are an excellent choice for you to build a significant corpus.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
