Why Recurring Deposits are a great way to inculcate a saving habit in young people?

Indian banks offer a wide range of investment options to the citizens of India, of which, Fixed Deposit and Recurring Deposit schemes are the most popular investment options. These options are mostly preferred by people who do not want to take any risk with their investments. For an RD investment, one has to invest a fixed amount of money every month for a pre-determined period of time. The amount invested will then be returned along with interest at the end of the tenure of the RD. The amount to be deposited every month, the tenure of the RD and the Interest rate will be decided at the commencement of the scheme.  Thus, making it a steady investment.

How to open a Recurring Deposit account and invest in it?

Once a person has decided to make an RD investment, all he needs to do is to contact the bank and inform them about the investment plan. An RD account will be opened only after deciding the investment amount that needs to be deposited every month, the tenure of the investment and the interest rate to be paid by the bank. Once decided, a simple form has to be filled in, that includes some personal details. The investor's identity proof and address proof documents have to be presented as well. Monthly payments can be done according to one’s convenience like online banking, direct fund transfer from existing bank account and ECS.

One more option of opening an RD account is by linking it directly to the existing Savings Account of an individual. For this, no documentation work is required. It is one of the easiest ways of opening an RD account.

Advantages of Recurring Deposits for Salaried People:

Following are the advantages of Recurring Deposits:

  • Investing in an RD scheme is a great option for salaried people as they do not have to invest a lump sum amount at one time as is the case in Fixed Deposits. In RD investments, the investor needs to invest only a part of their income every month, the amount of which is predetermined. This also makes it a great tool to inculcate the habit of saving in young people; also helping them cut down on unnecessary expenses.
  • The principal amount along with interest will be returned at the time of maturity of an RD. This amount can be used for short-term financial situations like going on vacations, annual Tuition fees for kids, marriage expenses, higher education expenses, etc.
  • People with low income can also start investing in the RD scheme as the minimum amount to be invested is as low as Rs. 1000 per month. Also, the investor does not have to invest a huge amount at one time.
  • Unlike Mutual Funds and Stocks which are subject to market risks, the entire amount invested in an RD is safe and secure. It will be returned along with interest at the end of the tenure.
  • The interest rate is decided at the time of opening an RD account. This will protect the investor from interest rate swings.
  • Nowadays, almost all popular banks are offering online Recurring Deposit facility. With this online facility, one can deposit money in their RD account, close the RD account, view transactions and update information. All this can be done from the comfort of their home and at a convenient time without having to visit the bank during working

So, now that you know all about RD investments, will you open an RD account today?

Looking to apply for a Recurring Deposit? Click to get started!

Read more about the different factors to consider before opening a Recurring Deposit.

You can book your Recurring Deposit through an HDFC Bank Savings Account. New customers can book a Recurring Deposit by opening a new Savings Account, existing HDFC Bank customers can book  their Recurring Deposit by clicking here.

*Terms and Conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.