How do Deposit Accounts in India encourage savings?

Investing your hard-earned money is the best way to grow it for future financial planning. Funds left idle in Savings Account hinders wealth growth. Hence, you must consider better investment alternatives. Now, there are Mutual Funds that offer lucrative returns. But they need adequate market understanding and risk appetite. If you want to keep it simple, Bank Deposits are the way to go.

Banks offer two investment options – Fixed and Recurring Deposit Accounts. Both are meant for short- and long-term financial planning. They provide risk-free returns on your funds. The primary difference lies in the methodology. Term Deposits accept lump-sum capital, whereas Recurring Account allows periodic deposits. Choose the type based on your suitability. Regardless of your selection, these accounts encourage savings in the following ways:

Insured deposits

Security is the biggest concern for investors. Rightly so, as they invest their hard-earned money. When it comes to safety, banks take stringent measures. One of them is insuring your funds in FDand RD. The Deposit Insurance and Credit Guarantee Corporation secures up to Rs. 1 lakh in a single deposit account. You may spread your investments in multiple accounts to optimally benefit from it.

High-interest rates

Savings Account gives nominal interest as the focus is on banking services. Fixed Deposit and RD investments are not restricted to such services. They merely hold your parked funds for further lending. Hence, banks only focus on giving you the best returns on them. As a result, you get higher interest rates than your Savings Account. This leads to substantial gains if you stay invested for the long term.

No financial burden

The minimum deposit requirement for deposit accounts is manageable. FD Accountstarts with as low as Rs. 10,000 in a lump sum. Recurring investments, on the other hand, begin at Rs. 500. This makes it perfect for periodic investments. Setting aside a portion of your monthly income for the same leads to ease of investment. You need not worry about accumulating a considerable amount.

Easy liquidation

Although locking in your funds is advisable to attain long-term gains, Deposit Accounts offer liquidity. Fixed investments come with a flexible tenure ranging from seven days to 10 years. Similarly, RD Account allows deposits from six months to ten years. Choose the duration based on your liquidation needs and financial goals.

Simple investment terms

Unlike Mutual Funds, you do not acquire any specialised knowledge to invest in deposits. They use the simple fundamental of parking your funds and generating returns. Besides, the account opening procedure is straightforward. You get to do it online on the bank's website or via the Banking app. You submit minimal information to complete the KYC formalities and attach supporting documents.

These reasons make Bank Deposits the best choice to increase your savings substantially without any market-linked risks.