When thinking of investing money in a safe and reliable way, the first thing that often comes to mind is the use of term deposit accounts or savings accounts with your banks. However, there is an equally effective alternative. You should consider investing your money through the Post’s Savings Plan, or more specifically, the Post’s recurring deposit account. With this method, your money and the interest you earn over time is safe. It should also be noted that the potential risk is relatively negligible while providing good returns.
That said, take a look at this particular program and how you can get the most out of it in the future.
La Poste’s recurring deposit account
The post office recurring deposit account is a government guaranteed system where you can deposit small amounts in installments. It also gives you better interest rates. The advantages of this program are that the minimum amount can be as low as Rs 100 to start your investment journey and the advantage is that there is no upper limit for the investment. You can literally invest as much money as you want.
There is, however, a caveat about this. When you normally open a savings account or a fixed deposit account with a bank, they give you options for a variety of mandates. In the case of the Post system, you can open the Post Recurring Deposit Account for a fixed period of five years.
Breakdown of interest rates for recurring post office deposits
This plan is one of the most popular choices because it offers an attractive interest rate of 5.8 percent. This is the latest interest rate set by the government and entered into force on April 1, 2020. The central government sets the interest rates for its small savings plans every quarter. How it works, compound interest is calculated quarterly which makes it very effective as it helps investors generate income on a frequent basis.
To highlight the effectiveness of recurring deposit investing, consider this: if you invest Rs 10,000 every month at the current interest rate of 5.8%, then in 10 years that amount will be compounded to give you about Rs 16 lakh in returns.
What is the capture?
Sometimes things can sound too good to be true, but in this case, it’s true. The only thing you need to keep in mind is that in order to reach your goal, you need to regularly deposit money on a monthly basis. If by any chance you skip a month or miss a payment, you have to pay a one percent penalty each month. If you miss four consecutive months of payments, the account will be automatically closed. However, you can still recover the account within 2 months from the date of default, but if you miss the window, it will be closed permanently.
It should also be noted that this system allows applicants to withdraw up to 50 percent of their deposit balance one year after opening the account. In the event that the individual opts for the repayment facility on the installments paid in advance, he will have to face a limit of only six installments.
The plan also allows account holders to designate other people to receive payment in the event of the death of the account holder. This appointment process can be done at any time.
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