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Why invest in fixed deposits

Global Banking And Finance 1 News

Fixed deposits are a great way to grow your money. Fixed deposits allow you to deposit a specific amount of funds in your account (with a bank or creditor). In accordance with the terms and conditions available, fixed deposits will earn you a fixed interest rate on the actual amount. Different banks offer different rates of interest and hence different maturity values. Therefore, before you put your money into fixed deposit, research thoroughly the rate of interest your bank has to offer.
Since the other money growing processes are becoming a bit riskier due to the volatility quotient heightening in the financial panorama, people are looking for safe havens for their money to grow at a considerate rate.    
So how does a fixed deposit work?
Putting your money in fixed deposits works somewhat similar to lending your money to a big financial firm or banks. So when you lend your money to a bank, they will in turn loan it to other seekers, to achieve high interest rates. The bank would earn a profit out of this entire dealing by keeping a margin for itself on the actual profit produced.
You can actually decide on the term to receive your rate of interest. You can choose the period as monthly, quarterly, half-yearly or yearly etc.
To deal with a fixed deposit account, the account holder should be 18 years and above. There may be certain prerequisites for a bank to allow you to open a fixed deposit scheme with them. Some of them might ask you to open a savings bank account before you can open a fixed deposit account.
How are the fixed deposit interest rate calculated?
The fixed deposit interest rates are not that difficult to calculate. You can apply the simple interest calculations to know the final maturity value.
Formula to calculate fixed deposit- Maturity value = Principal amount (1+ rate of interest*no. Of years)
The interest offered to you by the banks or companies can be paid in two distinct ways once you confirm. You can either choose to receive the interest amount as payout on a monthly, quarterly, half-yearly or yearly basis or opt to reinvest the interest amount and it is added to the final amount you receive after maturity at the end of the term tenure.
If you’ve your own monthly earnings from various resources, you can choose the reinvestment option for the interest to be added and compounded with the final withdrawal amount. The compounded interest will make your final earnings more than what you can achieve if you were withdrawing your interest by the end of each payout term.
 

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