The Habit of Saving Through a Recurring Deposit Scheme

Recurring Deposit Scheme

The practice of savings is like an art that one learns with time. A well-disciplined savings habit can make you cautious with money and help to garner a collection for a variety of goals. The most preferred and quickest manner to learn this habit of savings is to opt for a recurring deposit. In the recurring deposit, a fixed amount of money will be deducted and deposited for every month.  Here are how one can use this deposit scheme to build the habit of savings for the future. 

Fewer Funds to Spend-

The major reason for people failing to save is because of the availability of ready cash in their savings account. With a recurring deposit, there will be a limited amount of cash in the savings account for that one can spend. The reason for this is due to the habit of depositing a fixed amount of money every month into the recurring deposit scheme availed. There will be an awareness in the individual for saving money as well as being cautious in spending in unwanted things. The recurring deposit scheme will bring in a financial discipline. One can deposit money manually into the recurring deposit account or give instructions to the financial bank to deduct the money from the savings account on a particular date in every month. The advantage of this feature is that one will not miss out on any deposit. When there is a failure to make the deposit, the bank may levy a penalty in some cases.

Understanding an RD or a Recurring deposit-

In an RD or a recurring deposit scheme, the investor will deposit a particular set of an amount for every month in a fixed tenure which might vary from one year to five years. This deposit scheme has a significant difference when compared to a fixed deposit scheme. In a fixed deposit or an FD scheme, the investor will deposit a lump sum amount for once and will not be able to touch it for other use for a fixed period. People who do not hold or possess a lump sum will have the interest to deposit monthly in a recurring deposit scheme. In an RD scheme, the principal amount deposited will be returned at the end of the tenure with the interest amount. The interest rate is calculated every quarter in a recurring deposit scheme. 

Need for a recurring deposit-

The art of savings by investing in a recurring deposit works successfully because of the simplicity involved in the deposit scheme. One can open a recurring deposit at any bank by filling up of the recurring deposit form. One can start a very small amount of money, such as a hundred rupees per month. The deposited money will earn an interest rate and upon maturity will be credited into the primary savings account. When an individual opens a recurring deposit account with a financial bank, one will receive a separate passbook where the amount deposited which will ease the burden as the tenure as well as the interest rate will be mentioned in the passbook. 

Who can opt for a recurring deposit account-

The individuals, such as adults as well as senior citizens, can open the recurring deposit account. When the individual has a net banking facility, the account can be opened within a few clicks, and one is not required to visit the financial lender physically. The market fluctuations will not affect the returns in this deposit scheme, and one need not have any fear over it. 

Financial advisors feel that individuals who find it challenging to have the habit of savings can opt for a recurring deposit as it involves low risk. The recurring deposit scheme is very beneficial for the youngsters as well as the college-going students. It will help them save money for any short term needs such as purchasing gadgets, vacation plans, or any semester fees. Any individual can be in a position to manage their money efficiently.

Advantages and benefits of recurring deposits-

The recurring deposits are as old as the savings for the financial banking customers. The RDs are the most popular and secure way of investing for guaranteed returns. They are designed to save any amount for a short period. The recurring deposits are considered as an advanced version of fixed deposits. It is because the RDs are intended to understand that one may not be able to save all the money at one stretch. It enables the individual to save money a bit by bit and to avail the interest for the outstanding balance. Here are the advantages of the recurring deposit listed below. 

  • High-interest rate- The most significant benefit of a recurring deposit is the attractive rates. The interest rates offered in an RD is higher than a regular savings account interest rate in the financial market. The interest rates involved are per annum. The payout will be given once the maturity of the recurring deposit ends with quarterly compounding. The RDs are available for adults as well as senior citizens in the financial market. 
  • Involves no penalty if no deposit is made for a month- In any other deposit scheme, when the individual misses on a monthly deposit, there will be a monetary fine involved as a penalty. The recurring deposits are customer friendly and will not charge any penalty when the deposit is missed for a month. Even in the cases of premature withdrawal of a recurring deposit after thirty days and before six months, the interest rate that one gets will be the fixed deposit card rate that is applicable for 30-45 days. 
  • Start with a minimum amount- In an RD deposit scheme, there is no need to have thoughts over saving a considerable sum of money for every month to make a recurring deposit. The main key advantage in a recurring deposit scheme is that one can start with a minimum amount depending on the financial lender. The amount varies with one lender to another. 
    • Flexible tenure and affordable period- In any financial investment in the market, one has to be committed for a fixed period. The significant benefit in a recurring deposit is that the period of commitment is much lower than the rest. 
  • Simple documentation- The documents required for opening an RD or a recurring deposit scheme are not difficult. Any individual can open an RD or a recurring deposit account with a linked savings account. When the linked savings account is opened, there is no need for further documentation. It is the most hassle-free and straightforward way to save money and generate guaranteed wealth or returns.
  • Best for short-term goals- The recurring deposits are well suited for every short term goal of the individual. The time to achieve a short term goal will usually be from one to three years. The recurring deposit can be used to save money for yearly educational expenses for kids, repairing or renovation of homes, saving money for a vacation, and even marriage expenses. 
  • Saving by bits-  The most exciting part of a recurring deposit is that it understands the individual and it does not require one to deposit all the money at one go. There is a minimum deposit amount for fixed deposit whereas, in a recurring deposit, it allows to save smaller amounts regularly. One can also enjoy the attractive interest rates offered with the RD schemes. 


An RD or a recurring deposit account is always considered as an excellent option to make an emergency fund for building quick savings. It is still wise to think twice and make a smart move while planning to close your RD account prematurely. It is advisable not to make any premature withdrawals as the tenure will not be very long, and you can earn a rewarding interest. Hence, it is advisable to invest in an RD and make the most financial benefits out of them. Any individual can obtain the habit of savings with a recurring deposit scheme and fulfil their needs.