Fixed Deposits and their Assistance in Financial Stability
Financial literacy is defined as the possession of skills and knowledge that allows an individual to make informed choices and effective decisions with all their financial resources. Financial literacy has become the need of the hour with our ever-growing knowledge. Fixed deposits are often the main terms one hears when it comes to investing. However, knowing the interest rate of fixed deposits and understanding the same are two very different concepts. The fixed deposit interest rate is higher and provides a higher rate of interest until the given maturity date. Fixed deposits are investment instruments that are term deposits. This means that an individual makes fixed deposits at a predetermined interest rate for a fixed period. Fixed deposits can be offered by banks or by non-banking financial companies (NBFCs) and are considered to be a safer option when it comes to investing. Some of the major benefits of fixed deposits and their interest rates are:
A safer form of investment
Fixed deposits are regarded as some of the more secure forms of investing. Fixed deposits are a great way of seeking assured returns with low levels of risk. They are also considered a more stable form of investment.
Fixed returns
Returns are guaranteed from the borrowing rate of a fixed deposit. Fixed deposits and their interest rate are not market-driven hence an assured amount of money is received at the end of the maturity period. The rate of interest of a fixed deposit persists to be constant during the term.
Higher interest
The interest rate for a fixed deposit is often higher as compared to other deposits such as a saving account, etc. Fixed deposit and its interest rate are higher which ensures higher returns irrespective of the market fluctuations.
Tax deductions
A special type of fixed deposit i.e. a tax-saving fixed deposit account offers a tax deduction under Section 80C of the Income Tax Act, 1961. One can claim income tax deductions through this type of 5 years fixed deposit account. However, the interest earned from the fixed deposit is taxable. There are also special systems in place for the benefit of senior citizens and small deposit holders.
Savings are inevitable
Savings are bound to happen due to the structure of a fixed deposit and its interest rate. An individual invests a lump-sum amount of money for a specific period of time without the freedom to withdraw prematurely. The fixed deposit interest rate is also extremely favorable for higher returns.
Dependable for financial emergencies
A fixed deposit account can be an extremely dependable investment instrument. Loans can be easily issued against a fixed deposit in case of a financial emergency. In this, the fixed deposit is treated as a collateral amount for the loan and the fixed deposit interest rate allows for steady returns.
Hence, fixed deposits are highly beneficial investment methods as well as their interest rates. Fixed deposit interest rates can vary from 2.75% per annum to 6.75% per annum. They allow a safe and secure means of investing. Fixed deposit and their interest rates allow for consistent interest rates, special interest rates for senior citizens, different payment options, no market-related risks, etc. The fixed deposit interest rate is also higher which allows for stable interest and higher returns. The borrower can easily compare and contrast between different fixed deposit interest rates to choose one of their likings. A fixed deposit provides the means to safeguard one’s future and be financially responsible.