Fixed deposits have been one of the most popular investment options for Indians. Offering reliable returns and capital protection, FDs provide a fixed income periodically, helping individuals meet their diverse financial goals. Students looking to save for higher education and working professionals wanting to build a retirement corpus find FDs ideal to park their savings. However, students and working professionals must follow certain strategies when maximising FD returns. Their financial situations and investment needs vary significantly. What works for a student may not be suitable for a professional.

Let us look at some handy fixed deposit tips for students and working professionals to optimise their returns.

Fixed Deposit Tips for Students

As a student, your income sources are usually limited. You may receive a monthly allowance from your parents or earn a stipend from a part-time job or internship. Building your savings through FDs can help meet future expenses like higher education costs, gadget purchases, travel goals, etc. Here are some tailored tips for FD for students:

• Start Small: Open an FD account with a small amount like ₹5,000 initially. It will help you get familiar with fixed deposits without locking away a large sum.
• Choose Short-Term FDs: Opt for shorter tenure FDs of 6 months to 1 year. These FD student plans offer flexibility to withdraw funds to meet immediate needs.
• Look for Higher Interest Rates: Compare FD interest rates across banks and NBFCs. Opt for the one offering the highest rate to maximise your gains.
• Reinvest Your Returns: At maturity, reinvest your principal and interest earnings into a new student fixed deposit. This compounding strategy helps grow your wealth over time.
• Avoid Premature Withdrawal: Avoid withdrawing FDs prematurely to save on penalty charges. Take an overdraft if urgent funds are required.

PRO TIP for Students:

You can plan your FDs in line with your education tenure to fully benefit from compounding returns:

• When you enrol for higher education after finishing school, start with a 3-year FD aligned to the duration of your graduation course.
• Invest a portion of your pocket money, monetary gifts, scholarship amounts, etc., every year into this FD.
• By the time you complete graduation, this 3-year FD will have matured into a good amount.
• If you start post-graduation, realign your FD tenure to 2 years. Again, surplus funds should be invested every year in this FD.
• Once you complete your Masters, reinvest the matured amount into a fresh 5-year FD to earn higher returns until the end of your education.
• The interest from shorter tenure FDs can be reinvested to another FD.

This systematic approach of aligning FDs with your academic tenure ensures you invest regularly in line with your needs.

Fixed Deposit Tips for Working Professionals

For working professionals, FDs can be a tool for wealth creation and achieving financial goals like buying a house, child’s education, retirement corpus, etc. Here are some tips for working professionals.

Invest lumpsum bonuses, back pay and arrears directly into FDs instead of your savings account

At times, employees receive payments as a bonus and remuneration for some of their work a little later than when they executed the tasks. These payments are known as back-pays and are sometimes received annually. Apart from that, annual bonuses, reimbursements, and commissions are also received on a yearly basis.

These are sources of additional income and should be directly invested in FDs to earn higher returns instead of being parked in low-interest savings accounts.

Build an emergency corpus equal to 6 months of expenses through FDs in a liquid fund

By investing portions of your income regularly, you can maintain a separate FD fund for emergencies. Choose shorter 1-2 year tenures for easy liquidity.

Ladder your FDs instead of investing a huge amount in 1 FD

Split investments across FDs of varying tenures instead of locking everything in one long-term FD. This provides period liquidity to your portfolio.

Take loans against FDs in case of financial emergencies instead of premature withdrawal

Opt for the overdraft facility on FDs to access funds in contingencies without breaking the FD to avoid penalties.

Review and renew maturing FDs to benefit from compounding interest

Reinvest maturity proceeds from old FDs into new ones to maximise growth.

Conclusion

Fixed deposits are a safe and secure investment option that can be essential to any individual’s financial planning. Students starting their investment journey should start small and focus on short-term FDs.

Working professionals must align their FDs with specific financial goals and follow strategies like laddering to maximise growth. Students and working professionals can optimise their investment returns over time by choosing the right FD tenure and interest payout frequency and prudently reinvesting maturity proceeds.

FAQs

1. Can a student apply for FD?

Yes, students above 18 years of age can open fixed deposits in their own name. Students below 18 require a joint account with a parent/guardian.

2. How do I open an FD for a student?

Visit the financial institution’s branch with KYC documents and a minimum amount. Fill out the FD application form and begin your FD investment journey. You can also opt for online account access.

3. How do you smartly invest in Fixed Deposit?

Compare interest rates across banks, choose optimal tenures, reinvest maturity proceeds in fresh FDs, and opt for the sweep-in facility to maximise idle account balances.

How do I maximise my Fixed Deposit?

Opt for cumulative interest options, have longer tenures of 5 years, take loans instead of premature withdrawals, and reinvest interest earnings and maturity amounts.

5. Is FD better than stocks?

FDs are less risky and offer reliable returns. Stocks have the potential for higher returns but are volatile. Diversify investments across FDs, stocks and other options.

6. What is the minimum amount required to invest in an FD as a student?

Students can start investing in FDs with a minimum amount of ₹1,000. This low requirement makes FDs easily accessible to students who may have limited funds to invest.

7. What is a laddering FD strategy?

The laddering strategy involves building a ladder of multiple FDs with different maturity tenures. It helps manage periodic liquidity needs efficiently, while longer-tenure FDs earn higher returns aligned to long-term goals.

8. Can I withdraw my FD prematurely?

Yes, premature withdrawal is allowed on FDs. However, penal interest rates apply based on specific terms. Students should opt for short-term FDs for up to 1 year for easy liquidity, while professionals should ladder their FDs to meet unexpected expenses.