The Benefits of Automating Your Savings with Recurring Deposits

Automating your savings is a smart way to ensure that you consistently build wealth. Investing in Recurring Deposits (RDs) is one way to save in a disciplined way. RDs allow you to save in small, regular instalments and earn compounded interest on your investment. In this article, we will explore the key benefits when you automate savings with recurring deposits. So, let's get started!

Automate Savings With Recurring Deposits: An Overview of Benefits

1. Encourages Saving Habit

It can help you develop the discipline of saving money regularly, turning it into a habit. By automating your savings, you create a barrier between your disposable income and your savings. This encourages responsible spending and ensures that your hard-earned money is simultaneously accumulating and growing. This not only helps you save efficiently but also instills financial discipline.

2. Helps Develop Consistency

One significant advantage of automating your savings with RDs is the consistency it provides. When you set up an auto-debit from your savings account, the predetermined amount is deducted automatically, ensuring that you never miss a month of savings. This eliminates the possibility of spending the money elsewhere or forgetting to save altogether.

3. Provides Flexibility to Reach Your Goals

RDs offer flexibility in terms of tenure and monthly investment amounts. This makes them suitable for both short-term and long-term financial goals. Let's take a look at the different options available:

• Short-term RD: If you have a short-term goal, such as saving for a vacation or purchasing a gadget, you can opt for a short-term RD with a tenure ranging from six months to one year.
• Medium-term RD: For goals like funding your child's education or buying a car, medium-term RDs with tenures of 1-5 years are ideal.
• Long-term RD: If you are saving for retirement or planning to buy property in the future, long-term RDs with tenures of 5-10 years will help you accumulate a substantial corpus.

To choose the right tenure and monthly investment amount, you can use an RD calculator provided by banks or financial institutions. This tool helps estimate the returns based on different combinations of tenure and investment amounts.

4. Keeps You Safe from Market Fluctuations

Unlike investments in the stock market or mutual funds, RDs are not affected by market volatility. The interest rate for an RD is fixed when you open the account and remains constant throughout its tenure. This guarantees that you will receive the same rate and returns, irrespective of any changes in market trends or interest rates.

This stability is particularly beneficial during uncertain economic conditions when market fluctuations can impact other investment options. By automating your savings with RDs, you safeguard your money from such fluctuations and ensure steady growth over time.

Setting Up an Automated Recurring Deposit

1. Choose a Bank: Select a bank that offers RDs with competitive interest rates and convenient services. Consider factors such as reputation, customer service, and online banking facilities.
2. Open an Account: You can open an RD account either online through the bank's website or by visiting a branch near you. If you already have a Savings Account with Ujjivan, opening an RD is a breeze. You don’t have to provide any additional KYC documents.
3. Login to Internet Banking: If you choose to open an account online, log in to your internet banking portal or mobile banking using your credentials.
4. Navigate to Deposits: Once logged in, find the section for investments and deposits. It may have a different depending on your bank.
5. Select Recurring Deposit: Within the investments and deposits section, choose the option for opening a recurring deposit account.
6. Specify Tenure and Monthly Deposit Amount: Select the desired tenure for your RD, ranging from six months to ten years, and decide on the monthly deposit amount based on your financial goals and affordability.
7. Enable Auto-Debit Feature: To automate your savings, enable the auto-debit feature. You will need to specify the savings account from where the predetermined amount will be deducted every month and credited to your RD account.
8. Review Details and Confirm: Double-check all the details you have entered, including the tenure, deposit amount, and auto-debit instructions, nominee details, etc. 
9. Initiate First Instalment: In most cases, the first instalment of your RD will be deducted immediately after confirming the setup. Subsequent deductions will occur on the same date each month.