How does a Fixed Deposit help during a financial emergency?

June 24, 2021 3:48 PM

When you plan to invest, asset allocation is important. Fixed deposits form a key component of your cash asset allocation for ready liquidity and financial emergency.

fixed deposits, FD, fixed deposits news, benefits of fixed deposits, how to earn interest on fixed deposits, fixed deposits advantages, overdraft against fixed deposit, fixed deposit interest ratesAsset allocation is a process of dividing your money and investing into equity, bonds and cash instruments based on your risk appetite and time horizon.

For cautious investors and those new to investing, savings is synonymous with Fixed Deposits (FDs). Though not a new instrument, Fixed Deposit is a popular investment choice owing to its high safety quotient, especially for those that prefer to invest for the long term.

When you plan to invest, asset allocation is important. Asset allocation is a process of dividing your money and investing into equity, bonds and cash instruments based on your risk appetite and time horizon. Fixed deposits form a key component of your cash asset allocation for ready liquidity and financial emergency.

At the onset of the pandemic, many families faced financial uncertainty as individuals had to face job losses, pay cuts, etc., and were compelled to make lifestyle adjustments to deal with the situation. As India battles the second wave of the pandemic, people may need to dip into their savings to meet unforeseen expenses.

Here are five main advantages of having a fixed deposit to tide through trying times:

Tenure options

When it comes to tenure, there are plenty of options available. Banks offer varying interest rates based on the FD tenure. Usually, the longer the tenure, the higher the interest rate on the deposit. Digibank by DBS offers FDs with tenures ranging from 90 days to five years. So depending on your anticipated fund needs at a future date, you must choose an appropriate tenure!

Easy withdrawal

FDs come with a certain degree of financial flexibility. If there is an emergency, you can always choose to withdraw the deposit prematurely, which will be credited to your savings account instantly. The bank may sometimes levy little to no penalty charges for premature withdrawals.

Safety

Bank fixed deposits are among the safer investment options available for those apprehensive of market volatility. You also don’t have to worry about interest rate changes since the rate will be fixed for the tenure of the deposit, delivering assured returns to the investor with no fluctuations.

This makes FDs a great option for inculcating the habit of savings at an early age since the investor can experiment with amounts and tenures depending on their needs.

Deposit insurance

This is another advantage of having a fixed deposit. All bank deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a limit of INR 5 lakh. So your money is insured up to INR 5 lakh; this applies to each FD you hold and is another safety net associated with FDs. The insurance guarantees protection to all depositor’s money.

Easy to open

Opening a fixed deposit these days is the easiest thing and involves no cumbersome paperwork or processes. With the technological advancements in the banking world, you can open your fixed deposit in a few minutes through a mobile or laptop from the convenience of your home. You can even set your FD amount based on your personal financial goal.

A fixed deposit is your best friend on a rainy day. Investing in an FD ensures that the money is not spent on frivolous needs, but there is an assurance that it is available in emergencies. Moreover, it’s highly liquid, and if you decide to withdraw before maturity, you can have the cash deposited into your savings account quickly.

Now that you have all the necessary information on FDs, you can open one without hesitation and realise its potential to the maximum.

by Asheesh Jain, Head, Investment & FX Business, Consumer Banking Group, DBS Bank India

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Need a personal loan? Know how to avail one at a lower interest rate
2The impact of unsold inventory on real estate
3Caught in a debt trap? Here’s how to reduce your debt burden