Fixed Deposits for Students

Investing in Fixed Deposits (FDs) is advantageous for students as it is safe and stable, providing capital protection with predictable returns. FDs encourage disciplined saving habits through lock-in periods, making them suitable for short-term goals and get emergency funds when required.

 

The ease of operation, minimal maintenance, and potential tax benefits appeal to students. Additionally, FDs contribute to financial learning by introducing concepts such as interest rates and goal-oriented planning.

 

Building a positive relationship with banks through FDs can also improve the student’s creditworthiness for future financial transactions.

 

Refer to the table below to help you understand the potential returns you could earn on a monthly compounded ₹25,000 FD at an interest rate of 7.50% p.a.

Interest rates offered by banks/NBFCs on student FDs are as follows:

When you book an FD, it gives several benefits for students as a financial tool for savings and investment. 

Here are some key advantages of fixed deposit for students:

Stable Returns

FDs provide a fixed and predictable interest rate over a specified period. This stability can be reassuring for students who want to ensure a steady return on their savings.

Disciplined Saving

FDs often have a lock-in period or penalties for early withdrawal. This encourages disciplined saving habits among students, helping them set aside money for future needs.

Emergency Fund

FDs can serve as a reliable emergency fund. In case of unexpected spendings or financial emergencies, students can break the FD (with applicable penalties) to access the funds.

Ease of Operation

Opening and managing an FD account is a simple process. Issuers offer online platforms, making it convenient for students to monitor their investments.

Financial Learning

Investing in an FD provides students with an opportunity to learn about financial instruments, interest rates, and the importance of long-term financial planning.

Tax Benefits

Some FDs come with tax benefits, particularly those with a lock-in period of five years or more. This can be advantageous for students looking to save on taxes.

Short-Term Goals

FDs are suitable for short-term financial goals, such as saving for a specific purchase or funding a short-term project. Students can align their investment horizon with the maturity period of the FD.

Building Creditworthiness

Students who maintain FDs with a bank may enhance their relationship with the bank, which can be beneficial for future financial transactions and building creditworthiness.

Premature Withdrawal

The liberty of getting access to premature withdrawal provides flexibility and financial security to the students.

The minimum amount required to invest in a FD varies among banks and financial institutions. Generally, issuers set their own minimum deposit amounts, and these can differ based on factors such as the type of FD, tenure, and the specific terms of the financial institution.

 

In many cases, banks have relatively low minimum deposit requirements as low as ₹100, making FDs accessible to a broad range of investors.

 

It's crucial to check with the specific bank or financial institution where you plan to open the FD to determine their minimum deposit requirements. 

 

While the returns on an FD are assured, they can differ based on the interest rates and the tenure of the deposit.

 

Since student fixed deposits can determine the financial capital they have later on in life, it is important to take these decisions after significant deliberation. Make sure to check these details with the bank or NBFC before you start a FD with the concerned institution.

Students should consider the following factors before investing in a fixed deposit scheme:

• Compare interest rates across different banks and NBFCs to ensure maximum returns 

• Check the minimum amount required to open the FD account 

• See if the tenure is flexible and manageable 

• Stay informed about any penalties that are levied on premature withdrawals

• Understand and choose the right interest payout frequency

• Ensure the bank or NBFC is reliable and has some creditworthiness

Fixed deposits are one of the most preferred saving methods in India, and students hence should take advantage of such schemes. Student FD rates and tenures are curated keeping in mind flexibility and convenience for students.

 

In a way, students can get financial literacy and learn the importance of savings through FD for students.