Considering the existing financial challenges posed by the covid19, investing in credible savings schemes might just be the right approach towards streamlining the funds. However, before you move deeper into the world of investments, you must evaluate the options based on the security of the corpus and the financial benefits offered by each.
For starters, you can always consider investing in a fixed deposit scheme, owing to the secured nature of the funds and the financial discipline it helps create in an otherwise erratic financial hierarchy. However, apart from the FDs, you can also consider some of the other small and large saving schemes that have different interest rates and provenances to account for.
In the subsequent section, we shall skim over the concept of FD interest rates whilst ascertain the long and short-tenure gaps corresponding to the same with other saving schemes, including Post Office deposits.
Short-term gaps in Interest Rates
If you are looking to invest a particular sum for a year or so, we wouldn’t recommend fixed deposit as the interest rates aren’t high enough and banks have been lowering them further, in the wake of the pandemic. For instance, a majority of financial institutions are persisting with a 5 percent ballpark on year-long, fixed deposit investments. In comparison, the post office schemes for a year-long investment offer something in the 5.5 percent ballpark.
Despite the significantly higher rates offered by Post Office Time deposits, FDs are still prioritized owing to the flexibility of premature withdrawals. Besides, certain banks are still trying to work around this limitation by offering a higher interest rate to senior citizens.
Long-term gaps in FD interest rates and other savings schemes
In case you are opting for the long-term FDs i.e. 5 years or more, you can expect interest rates amounting to almost 5.5 percent. However, certain policies targeting senior citizens attract higher interest rates, often 0.50 percent higher as compared to the existing ones.
Post office schemes, on the other hand, offer an interest rate of up to 6.7 percent for a five-year savings scheme. NSCs, similarly, offer something close to 6.8 percent for five-year schemes. Moreover, almost every investment plan opted for 5 years falls under the tax exemption category, based on the Section 80C guidelines.
Why Prefer FDs?
If higher interest rates are more important to you, the glaring gaps automatically point towards other small savings schemes like the Post Office Time Deposits and National Savings Certificates. However, if you still prefer banking institutions and HFCs for your FD investment, consider looking at the special offers and policies that offer higher interest rates.
A fixed deposit scheme offered by banks, HFCs, and other lenders comes with a decent liquidity rate and is backed by an excellent customer support system, something that is elusive in post office schemes. Then again, if you purely want to concentrate on monetary gains, higher interest rates offered by other savings schemes outweigh the flexibility, safety, and reliability of FDs.