Are you looking to save a portion of your income every month? Consider opening a recurring deposit account, which can be set up at a post office or bank. With this account, you’ll earn monthly interest on your savings and can deposit as much as you like.
Many people, especially those in the middle class, cannot invest large sums of money and instead opt to save a portion of their earnings for future needs.
The central government offers recurring deposit accounts through post offices, aimed at helping low-income and everyday individuals save regularly. These accounts can also be opened at any bank.
You can make monthly, quarterly, half-yearly, or annual deposits. In the long run, you can expect good returns, as banks and post offices offer attractive interest rates.
Post offices, for instance, provide a maximum interest rate of 6.70 percent on 5-year recurring deposits, with interest being calculated and credited to the account every three months.
For example, if you save Rs. 500 per month in a post office recurring deposit account, you would have Rs. 30,000 after five years, with an additional interest of Rs. 5,680, resulting in a total of Rs. 35,680.
Many banks offer competitive interest rates on bank recurring deposit accounts. For instance, HDFC Bank offers rates ranging from 4.50 to 7 percent on RD accounts with tenures from 6 months to 10 years.
Similarly, the State Bank of India offers interest rates from 6.50 to 7 percent on tenure deposits of one to 10 years. Senior citizens may also receive additional interest on their deposits.
While post offices tend to offer slightly higher interest rates on 5-year tenures compared to banks, the difference is minimal, and both options are covered by the Deposit Insurance Credit Guarantee Scheme, providing insurance protection to your savings.