“Don't judge each day by the harvest you reap, but by the seeds that you plant,” said Robert Louis Stevenson. But what the Scottish novelist didn't mention was that you need to sow the right seeds in the right manner to reap the best benefits.
Investing in a bank deposit is lot like sowing seeds. And before you get down to it, keep these 10 things in mind to make sure you get the best out of the money you put in:
* A bank deposit will earn you returns that are higher than what idle money in your savings account will earn.
* Interest rates offered depend on the term of the deposit. Longer terms generally earn higher returns, which can be compounded as well.
* Bank deposits are best for risk-averse investors who are reassured by guaranteed returns. But remember that returns from bank deposits won't always help you beat inflation.
* You need to be an adult Indian resident with a savings account to open a bank deposit.
* Make sure the bank is insured under the Deposit Insurance and Credit Guarantee Scheme of India. Only then will your capital be fully protected.
* A deposit comes with a lock-in period, but can be liquidated in the form of loans and withdrawals subject to conditions. You can also close a deposit prematurely, but at the cost of the interest earned.
* 5-year deposits give you the added benefit of tax deductions under Section 80C. However, the interest earned will be taxable.
* You can open a deposit online using net banking facilities or by visiting the nearest branch.
* Compare interest rates between banks before putting your money in.
* Split a large amount into 2-3 deposits to reduce the impact of interest loss in case of premature withdrawal.
This article was originally published on February 12, 2014.
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