Relation Between Time Period and Rate of Interest for FDs

Posted by amankhaana on May 1st, 2017

When you deposit your money in a bank or financial institution for a particular period of time, the lending entity pays you interest for that period. Fixed Deposit is a pretty popular option for investment for people from all over the world.

But how long you should deposit your money. 5 years? 8 years? A few days? You can choose a deposit term as short as 7 days or as long as 10 years. Whatever you choose, it’s advised that you split the lump sum into several FD accounts for different time periods. This way, you can withdraw the amount in case of emergency, or you can let it accumulate interest for that time.

Fixed Deposits in a Bank for a Period of 1 Year or Less

Public sector banks charge 5.50% to 6.50%p.a. But private banks charge anywhere between 4% to 6.50% p.a. Invest your money for a period of 1 year or less if you think you’ll need the money shortly.

Fixed Deposits in Bank up to 5 Years

You can choose a term of 2 to 5 years if you think you won’t need the money immediately. For example, you can close an FD account after 5 years and use the savings to fund your children’s education.

The rate of interest hovers between 6.50% to 6.75% for government aided banks. Private banks like ICICI have set the benchmark at 6.75% p.a. In the case of post-office savings, you can find attractive rates of 7.10%, 7.30% and 7.80% for 2 years, 3 years and 5 years respectively.

Riya has invested Rs.10000 in a private bank. They offer her 6.75% interest rate. Her total interest earned would amount to Rs.3,975. At maturity, including the principal, the amount would be Rs.13,975.

Decide on the principal amount and the duration carefully. It makes a lot of difference as to how much you stand to gain.

Fixed Deposits in Bank for Period Between 5 Years to 10 Years

SBI and ICICI bank offers 6.50% interest rates. If you invest Rs.20,000 for a duration of 8 years at 6.50% interest, you can expect a decent sum of Rs.33,500 on maturity.

As you’re well aware, to avoid premature withdrawal and penalty, you should choose a term of 200 days or 1 year for a short-term investment. If you’re looking at long-term savings and don’t intend to use the amount immediately, 10 years or 5 years can be ideal.

In the online you can find the lots of Fixed depsoit calculator for etermined the your FD retuens. Here’s a good tip. Decide the initial amount depending upon your financial status and requirements for the future. This way, you can plan your investments based on your financial capabilities. That’s something that can help you make an effective investment, and not leave you either saving too little, or struggling to make ends meet while your money is locked away.

There are several reasons why you should choose FD over regular savings. One, you’re promised good returns for your investment. Second, it helps you cultivate the habit of saving money. Whether your lock-in period is for 91 days or 9 years, FDs are a great way to ensure that you get the most of your money without risking too much. That’s one of the best deals that you can get when it comes to investments.