Recurring Deposit

Meaning :

A Recurring Deposit (RD) is defined as a savings product in which a fixed amount is deposited every month for a predetermined period, earning guaranteed  interest on the total amount deposited. This savings method encourages regular saving  habits and is particularly suitable for individuals who prefer making small monthly  contributions rather than large lump sums.

Example : 

For instance, consistently depositing ₹1,000 every month in an RD for 2 years  exemplifies a disciplined approach to savings.

How to Understand : 

Think of an RD as a systematic savings plan where you "save a small amount regularly."

It promotes financial discipline since the same amount is deposited each month, making it easier to manage.

Over time, these small contributions accumulate, growing into a substantial amount with earned interest.

Importance :

RDs are instrumental in building long-term savings for future financial goals or emergencies.

They are ideal for beginners, students, and salaried individuals who wish to cultivate a habit of saving.

RDs are considered low-risk investments that offer fixed guaranteed returns, providing  peace of mind to savers.

They encourage regular financial discipline by making saving a fundamental part of one’s  monthly budget.