It was only November when Aarti and her friends started planning for a quick weekend getaway over the summer. With rising petrol prices and hotel fares, Aarti is concerned about how she can afford the trip with her girls. Her roommate Sumana walks in when she is just about to panic. She says Recurring Deposit is an easy way to start saving for these short-term goals and introduces her to the RBL Bank Recurring Deposit scheme.
Financial Planning with Recurring Deposit
To be financially sound, planning is important. Financial planning involves creating a basket of financial products and investing in them to get the maximum benefit. This planning depends on your current income level, financial goals, and level of risk you are willing to take.
Let us take Aarti as an example. She is an aspiring youth who finished her first year of employment at an MNC. Living away from her parents, she has to manage her monthly rent, food, and living expenses with the monthly salary, not to mention her social expenses. For Aarti, it might be difficult to park a major portion of her monthly income towards savings. Nor will she have any lump sum money for big spending. She is the perfect candidate for opening a Recurring Deposit account.
Understanding Recurring Deposit
A Recurring Deposit is a type of term deposit offered by banks in India that can be used to deposit a fixed amount each month over a period of time and accumulate interest.
A Recurring deposit is a good idea for fixed income groups as it encourages them to invest a small amount over a stipulated period. It helps build a habit of saving. Some of the major benefits of Recurring Deposit are mentioned below.
- Easy investment with attractive returns
- Easy payment options directly from savings account through standing instructions
- The booking period can be between 6 months to 20 years
- Nomination facility available
- Online channels such as Net Banking and Mobile Banking can be used to book Recurring Deposit
One of the biggest benefits of Recurring Deposit is that there is no need to make a one-time lump sum deposit. This is an advantage for those who do not have or don’t wish to partake a large amount to invest right away. Recurring Deposit allows the investor to deposit a fixed sum per month and earn an interest amount monthly. Upon maturity, the investor will receive the total investment along with interest. The interest remains constant all through your investment period.
Meet financial goals with Recurring Deposit
Aarti can start saving through a recurring deposit to achieve certain financial goals. There is no downside as it is a regulated product with minimal risk involved. Here is a short list of goals Aarti can achieve by investing in recurring deposits.
- A six-month tenure with a monthly Recurring Deposit of Rs. 2,000 can help her save for a getaway trip with friends
- Opening a Recurring Deposit for Rs. 5,000 a month for 12 months should be enough to buy an iPad as a gift for her mother.
- Longer tenure of 2 years or more with Rs. 7,500 can be used to finance other financial investments such as mutual funds or shares.
Features of RBL Bank Recurring Deposit
RBL Bank offers Recurring Deposit accounts with lucrative interest rates and long tenure. The hassle-free account opening process makes it easy to open an account from anywhere. Here are some of the benefits.
- It helps promote a habit of saving
- Recurring Deposit can be opened with as little as Rs.1,000 per month
- Depending on the need, Recurring Deposit can be opened for six months or 20 years
- Gain attractive interest rate
Recurring Deposit is one of the many financial products that has stood the test of time. It is one of the easiest and safest offerings that gives investors the freedom to plan their short-term goals. Simply put, it is the adult way of a piggy bank saving, only this time with interest. The beauty of a Recurring Deposit lies in its simplicity — one can give standing instruction and forget about it. However, to ensure that your saving scheme is successful, here are a few things to remember.
- Always plan for a Recurring Deposit based on the money you can part with every month. If you can invest Rs. 1,000 a month, then do not over-commit.
- When placing standing instructions, make sure the account has a sufficient balance at the time of debit. Default of payment can lead to a penalty.
- Various tenure periods have different interest rates. While interest rate matters, choose based on your financial situation and goals.
Aarti realized how easy it was to build a habit of saving by parking money in an account that gave her additional income at the end of her tenure. She even went on to recommend to her friends to save through Recurring Deposit so that their next getaway can be even bigger!