Different types of savings deposits and investments are always convenient for earners since it allows them to save for future expenditures slowly. According to FY 2018-19’s report, Indian financial institutions reported around Rs.40 lakh crore in savings by Indians. Foreign institutions reported a further amount invested in their accounts, which almost reached Rs.60,000 crore.
Consequently, these organisations have introduced many new plans which make investment easy for the newly employed or self-employed, especially for those who are new professionals. One such savings tool is the Systematic Deposit Plan. Learning how to calculate the returns on a Systematic Deposit Plan is essential to choose the best SDP to invest in. While online calculators are easily available for investors to use, it is also crucial to learn how to use it.
Once a potential applicant has checked the return he/she can expect, it is important to check the necessary documents to invest in this plan. While every Indian citizen can save in such a plan, the document requirements for the best SDP to invest in can mildly vary over different financial institutions.
What is Systematic Deposit Plan?
A major issue with investment options like FD is that it requires a substantial amount to have a worthwhile return on it. As a result, it has been continually difficult for new earners to invest in such a plan.
Distinctly different from Systematic Investment Plans, Bajaj Finance has launched Systematic Deposit Plans, which are a convenient option as a savings tool, even for new earners. While specially designed to cater to the savings habits of upcoming professionals who do not have a large sum of money saved, even experienced individuals can avail the benefits of such a plan.
Advantages of Systematic Deposit Plan
It is important every potential investor understands the different benefits offered by Systematic Deposit Plans so that they can avail the advantages which are exclusive to them.
These advantages are discussed below in detail –
- Small investment amount: Especially for new earners who do not have a large saving, investing in an FD is redundant since the return on it will be very limited. For such individuals, systematic deposit plans are especially helpful. Any individual can easily save a sum of money every month for a fixed tenor, earning interest on every deposition till the time of maturity. Under this plan, individuals can begin by saving a minimum of Rs.5,000 per month.
- Assured amount: Unlike investment options like Systematic Investment Plans, the return on Systematic Deposit Plans can be easily estimated by investors. The interest that is offered every month on these savings can be easily checked by investors to calculate the total return on their investment.
- High rate of return: The interest rate offered on this investment policy is typically high, making it an attractive option. Both new earners, as well as the old, can invest in these accounts to avail interest at a rate of 7.6% or above, ensuring they have a high return on their savings.
Investors can even use an SDP calculator after they have decided on their deposit amount and tenor to check their return.
- Flexibility in investment sum: The deposit amount begins at Rs.5,000 per month. However, that is not the only option that can be deposited in such plans. With no higher limit on the amount that can be saved, investors can choose to deposit as much they can.
- Choice of tenor: A flexible tenor option is offered on Systematic Deposit Plans, unlike in the case of Systematic Investment Plans, though these are for much shorter tenor than the latter. Beginning at a minimum investment tenor of 12 months, investors can choose any duration up to 60 months for their investment.
- Choice of deposit date: Investors also have the choice of selecting a deposit date according to their convenience. This date, once chosen, remains fixed over the whole tenor. Typically, investors have the option to choose a date among the options of 3rd, 7th and 12th of every month when they begin their savings.
- Option for premature withdrawal: Investors can also opt to withdraw their savings in case of any financial emergency, even if their deposit tenor has not concluded.
Unlike in the case of Systematic Investment Plans, customers investing in Systematic Deposit Plans can choose to withdraw a single deposit, as long as they have completed 3 months of their savings policy.
- Develop savings habit: A major advantage of investing in these accounts is that it helps new earners to develop the habit of savings. While the secure return makes it a safe savings tool, regular deposits instil the habit of saving regularly to build a large corpus for the future.
- Loan options: In case of financial emergencies, investors can also avail a line of credit by using the account as collateral. The advantage of availing such lines of credit is the low-interest rates since these are secured. Usually, these loans are approved very promptly too since there is no additional necessity of verification.
While the advantages above are reason enough why Systematic Deposit Plans are a better option than Systematic Investment Plans in helping earners with a better financial life, it is important to note a few other things as well. Beginning at Rs.5,000, it is not a heavy financial liability, thereby making it convenient for youngsters to avoid missing out on any payment.
Furthermore, it also allows new earning individuals to save for their future expenses like higher educational plans, planned medical procedures, constructing or buying a home, etc. While saving for such purposes, it is advisable that investors do not just calculate their return using an SDP calculator, but also try and plan out the total expenditure for which they are saving.