Post Office Recurring Deposit : How to Earn ₹2 Lakhs by Saving ₹100 Daily : Comprehensive Guide
Post Office Recurring Deposit : Saving money consistently over time can be transformative, especially when combined with the power of compound interest. Among the plethora of small savings schemes available in India, the Post Office Recurring Deposit (RD) Scheme stands out for its safety, accessibility, and consistent returns. This scheme is particularly suitable for individuals looking to build a substantial corpus through small, regular investments.
Table of Contents
This essay delves into the mechanics of the Post Office RD scheme, highlighting its benefits, application process, flexibility, and a practical example of how saving ₹100 daily can result in earnings of ₹2 lakhs in just five years.
Understanding the Post Office Recurring Deposit Scheme
The Post Office RD scheme is a trusted savings option managed by the Government of India.
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It is designed to encourage individuals to save small amounts regularly and benefit from compounded returns over time.
Key Features of the Scheme
- Guaranteed Returns:
The RD scheme offers a fixed interest rate of 6.7% per annum, compounded quarterly. This ensures that the investor receives stable and predictable returns. - Flexibility in Deposits:
- Minimum Deposit: As low as ₹10 per month, making it accessible for all income groups.
- Maximum Deposit: There is no upper limit, which means individuals can save as per their financial capacity.
- Eligibility:
- Accounts can be opened individually or jointly.
- Minors aged 10 and above can open accounts in their own names.
- Parents or guardians can also open accounts on behalf of children below 10 years of age.
- Tenure and Extensions:
The standard tenure is 5 years, which can be extended if needed. - Loan Facility:
After one year of account opening, account holders can avail of loans up to 50% of the deposited amount, with an interest rate 2% higher than the scheme’s rate.
Advantages of the Post Office RD Scheme
1. Accessibility and Inclusivity
The scheme is available at every post office across the country, making it accessible to rural and urban populations alike. Its low entry barrier ensures individuals from all economic backgrounds can participate.
2. Competitive Interest Rates
With an interest rate of 6.7%, the RD scheme often outperforms regular savings accounts and some fixed deposit options, particularly in rural areas where financial literacy may be limited.
3. Compound Interest Benefits
Unlike simple interest, compound interest ensures that interest is calculated on both the principal and previously earned interest, accelerating the growth of savings.
4. Flexibility in Premature Closure and Withdrawals
Investors have the option to withdraw funds before maturity or close the account early if needed, ensuring financial liquidity in emergencies.
5. Safety of Investment
Being a government-backed scheme, it provides 100% safety for the invested amount, unlike market-linked instruments.
How to Open a Post Office RD Account
Opening an RD account at a post office is a straightforward process:
- Visit the Nearest Post Office:
Go to your local post office and request an RD application form. - Submit Necessary Documents:
- A passport-sized photograph
- Proof of address (e.g., Aadhaar card, utility bill)
- PAN card or other valid identification
- Complete the Application:
Fill out the form accurately and submit it along with the required documents to the post office official. - Initial Deposit:
Make the first deposit, which can be done via cash or cheque. This marks the activation of your RD account. - Deposit Regularly:
Ensure that monthly deposits are made consistently to avoid penalties.
The Power of Saving ₹100 Daily
Saving ₹100 daily may seem modest, but over time, it can lead to significant financial outcomes. Let’s explore how this works under the Post Office RD scheme.
Example Calculation
- Daily Savings: ₹100
- Monthly Contribution: ₹3,000 (₹100 × 30 days)
- Tenure: 5 years (60 months)
- Interest Rate: 6.7% (compounded quarterly)
Outcome:
- Total Deposited Amount: ₹1,80,000 (₹3,000 × 60 months)
- Interest Earned: ₹34,097
- Maturity Amount: ₹2,14,097
In this scenario, by simply saving ₹100 daily, an individual can accumulate over ₹2.14 lakhs in five years, with ₹34,097 earned as interest alone.
Why the Post Office RD Scheme Stands Out
1. Encourages Discipline
The scheme requires consistent monthly deposits, fostering a habit of disciplined saving.
2. Suited for Long-Term Goals
It is ideal for individuals planning for future financial needs, such as education, marriage, or emergency funds.
3. Adaptable for All Ages
Whether it’s a parent saving for a child’s education or a retiree looking for secure returns, the RD scheme caters to diverse needs.
Tips to Maximize Returns
- Start Early:
Begin saving early to take full advantage of compound interest. - Avoid Missed Payments:
Ensure timely monthly deposits to prevent penalties and maintain the compounding effect. - Consider Multiple Accounts:
Open multiple RD accounts to save for different goals simultaneously. - Reinvest Maturity Amount:
Use the maturity proceeds to reinvest in other financial instruments for continued growth.
Comparing RD to Other Investment Options
Fixed Deposits (FDs):
While FDs also offer stability, they lack the regular deposit feature of RDs, making them less suitable for small monthly savers.
Mutual Funds:
Mutual funds can provide higher returns but come with market risks, unlike the guaranteed returns of the RD scheme.
Savings Accounts:
Savings accounts generally offer lower interest rates, making RDs more attractive for long-term savings.
Challenges and Considerations
- Penalties for Missed Payments:
Missing monthly deposits may result in penalties, reducing the effective returns. - Fixed Interest Rates:
Unlike some market-linked instruments, the interest rate remains fixed, which could be a disadvantage during high-inflation periods. - Moderate Returns:
While the returns are higher than savings accounts, they are lower than some high-risk investments.
Post Office Recurring Deposit – Conclusion
The Post Office Recurring Deposit Scheme is a powerful financial tool for individuals looking to grow their savings steadily and securely. By investing as little as ₹100 daily, one can accumulate over ₹2 lakhs in just five years, thanks to the scheme’s attractive interest rate and compounding benefits.
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Its accessibility, government backing, and flexibility make it a go-to choice for small savers across India. For those seeking a blend of safety, discipline, and reasonable returns, the RD scheme is a perfect match. By embracing this savings method and maintaining consistency, individuals can achieve their financial goals and build a brighter future.
