When you step into the financial world and start earning, we often get caught up in planning various ways to spend it. What we forget is to save our money. We dismiss the importance of saving, as we are consumed in spending it on a new gadget or on products that we don’t use. There are several ways in which an individual can save money efficiently – a fixed deposit is considered to be one of the safest ones. A fixed deposit is also known as a term deposit, nevertheless both are exactly identical. However, the concept of fixed deposit is hazy for those without a financial background, and this is where a FD calculator comes in.
A tool which can help ease the stigma around financial investments such as Fixed Deposits is a FD Calculator. A FD calculator basically allows an individual with little financial background to easily understand the information they need. For example, as an ordinary FD account holder we only wish to know about the interest returns from investing in various FD accounts in various banks. The fixed deposit interest calculator allows us to completely customise the fixed deposit’s duration, interest rates, and initial amount to determine the interest one would get on an annually or quarterly basis.
One concept several young adults have a difficulty in comprehending is the idea of an interest rate. What exactly in an interest rate? To simply put, an interest rate is something that is decided by the government or by the bank and is represented in a percentage format. An interest rate can be earned or charged, for example when an individual invests in several FDs, the fixed deposit interest rates is earned annually or quarterly. However, when a credit card charges an interest rate it is when you haven’t paid the due amount and an extra fee will be charged. This fee will be a set percentage of the amount you forgot to pay. However, when we invest in FDs we earn interest after a particular period of time. It is vital for young adults to understand the basics of interest rates because it is an important aspect of a fixed deposit and is essential when learning to use the FD calculator.
An FD calculator can show how much your principal has grown due to compounding. However, the term ‘compounded’ is misunderstood by many. Simply put, it is earning interest on interest. An example will explain the term in a more efficient manner: For example, you invest amount Rs. X at the interest rate of Y%. Compounding this value will allow the individual investing to earn much more than what they could have earned had they kept the money in a regular savings account. The compound interest, for example, will allow an individual to earn interest in their second year on the initial value invested and the interest from the last year that was accumulated.
A FD is extremely convenient as it is online and can be accessed from the comfort of your home. Furthermore the FD calculator will predict the overall interest earned as well as the future value of the FD. An FD calculator is an essential tool and is highly recommended to be used prior to deciding in which bank you would open an FD.
Tags: FD calculator, fixed deposits, FD