CCImportance of identifying financial goals when choosing FD tenure
Among individuals looking for a safe way to grow their savings, Fixed Deposits are often a popular choice. They are easy to open and provide good returns. However, when opening an FD, one of the crucial factors to determine is the tenure of the FD, as the tenure directly influences the interest you earn.
However, when selecting the term of your FD, you need to consider certain factors, one of which is your financial goals. Here, we explain what an FD is and why identifying your financial goals is crucial when opening this deposit.
About FDs
An FD is a Term Deposit. It lets you deposit a lump sum for a certain period and earn interest on the amount at fixed FD interest rates. These rates not only vary across banks but also depend on the tenure you pick. Hence, you need to choose the tenure carefully. Various banks offer FDs. They are also available in different types. This lets you consider multiple options and open one that matches your needs.
Importance of knowing your financial goals
Today, you can easily open an FD online using Mobile or Online Banking. The process is usually paperless and lets you open an FD Account instantly from anywhere and at any time. When opening an FD, selecting a suitable tenure is crucial. To do that, one of the factors you need to determine is your financial goals and the time you need to fulfil them.
- For short-term goals
If you want to fulfil short-term financial goals, like a vacation or saving for a down payment, you could select a shorter tenure for your FD. This could range from three months to a year. A shorter tenure for your Fixed Deposit lets you access your savings quickly while taking advantage of the interest rate. This lets you achieve your goal without locking away the money for a long time.
- For medium-term goals
When opening an FD using your Banking app to fulfil your medium-term goals, you need to strike a balance between flexibility and returns. Such goals may include needs like saving for your child’s higher education. Here, medium-term FDs with tenures between one to five years may be suitable. Such FD tenures usually offer higher interest rates than shorter tenures.
Choosing a five-year tenure can also let you take advantage of the power of compounding. However, consider your liquidity requirements before selecting such a tenure.
- For long-term goals
For such goals, you usually have a longer investment horizon. Consequently, tenures ranging from five to 10 years might be suitable when opening a Fixed Deposit Account. Longer tenures offer you the benefit of compounding. Therefore, it boost your final returns.
Conclusion
Before opening an FD Account online, it is crucial to determine your financial goals and the time you must fulfil them. This helps you align your FD tenure with your financial goals and ensure your funds are invested for the required duration.
