Could you explain the concept of short term FD?
A short-term fixed deposit (FD) is my go-to option when I want to park my money safely for a few months without locking it away for years. It’s a simple investment where I deposit a lump sum with the bank for a short period. The tenure is usually anywhere between 7 days and 12 months, and you earn guaranteed interest on it.
What I like about short-term FDs is the flexibility. I can choose a tenure that suits my needs. If I know I’ll need the funds in six months, I just pick that exact duration. The returns may not match those of a long-term FD, but they’re steady and less risky, which is perfect for short-term goals.
Here’s how a short-term Fixed Deposit works:
- Tenure: I can choose the period, say 3 months or 9 months.
- Interest Rate: The bank offers a decent interest rate for that tenure, and I earn interest accordingly.
- Maturity: When the FD matures, I receive the principal plus interest directly into my account.
Short-term FDs suit me best when I’m saving for upcoming expenses. The returns are higher than a regular savings account.
However, I avoid breaking the FD before maturity because banks charge a penalty on premature withdrawals. So, I always plan my tenure carefully.
In short, a short-term fixed deposit helps me earn stable returns without taking risks. It’s ideal when I want to keep my money working, even for a short time.