In today’s world, everyone wants a secure future and wants to avoid financial worries in old age. If you’re going to gradually accumulate a substantial amount of capital without any risk, post office savings schemes are the best option for you. Post Office Recurring Deposit (RD) is one such superhit scheme that offers strong returns with a government guarantee.
The biggest advantage of this scheme is that you can start investing with a small amount from your pocket and become a millionaire over the long term. Let’s understand in detail how saving just ₹333 daily can create a solid fund of ₹17 lakh.
Post Office RD
Post Office RD has been designed keeping in mind the budget of the common man. Currently, the government offers an annual interest rate of 6.70% on this scheme, which is calculated on a quarterly compounding basis. Since this is a government scheme, your money is 100% safe and is not affected by stock market fluctuations.
Who can open an RD account?
This scheme is open to almost every Indian citizen. Whether you are employed, a small business owner, or a student, you can benefit from this powerful scheme. Any adult Indian citizen can open a single or joint account. RD accounts can also be opened in the name of children over 10 years of age, although updating their KYC is mandatory upon reaching 18 years of age. You can start this steel scheme by visiting your nearest post office or from home using internet banking.
Maturity and Extension
The original term of a Post Office RD is 5 years. But the most important thing is that after maturity, you can extend it for another 5 years. This means you can continue investing for a total of 10 years.
If you urgently need money, you have the option of premature closure after three years. Furthermore, in the unfortunate event of the account holder’s death, the nominee can claim the entire deposit amount or continue the scheme if they wish.
How can you earn ₹17.08 lakh
Let’s now understand the real math of how small savings can turn into a substantial fund. If you save approximately ₹333 daily, your monthly investment amounts to ₹10,000. If you deposit ₹10,000 every month for five years, your total deposit will be ₹600,000. At 6.70% interest, you will earn ₹113,659, which will yield ₹713,659 upon maturity.
The real magic begins when you extend this scheme for another 5 years. In 10 years, your total deposit will reach ₹12,00,000. Over this long period, the power of compounding will increase your interest to ₹5,08,546. Thus, at the end of 10 years, you will receive a whopping ₹17,08,546. Similarly, those who prefer a smaller investment can earn a substantial return of approximately ₹8.54 lakh upon maturity if they deposit even ₹5,000 per month for 10 years.
Loan facility in difficult times
Post Office RD is not just a savings tool; it also provides you with a solid cushion when needed. After one year of account operation, you can take a loan of up to 50% of your deposit. You can repay this loan in easy installments or in a lump sum at maturity. This facility is much cheaper and simpler than a personal loan, protecting you from financial hardship in an emergency.