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Why Fixed Deposit is a Good Option for Travel Plan?

21 June 2022

Travelling is probably one of the best pleasures in life. It opens us to experiences that we would never have if we stay in the comfort of our homes. 

However, travelling also costs money and most of us put off our travel plans because of the expenses associated with our desired travel plans. With inflation rising, most of us try our best to invest our savings into instruments that help us achieve our life goals with ease. But, this does not mean that you have to postpone your travel plans indefinitely. There are ways to fund your vacation by making smart investments without impacting your regular savings. 

Of these, fixed deposits are one of the best options. In this article, we will share the benefits of choosing a fixed deposit to plan your vacation.

Fixed Deposit

A Fixed Deposit or FD is an investment instrument that allows you to invest a fixed amount of money for a fixed tenure at a fixed rate of interest. When the tenure ends, you receive your invested capital plus interest. Banks and many non-banking financial companies offer fixed deposits to their customers. The returns are not market-linked and hence, FDs are known as one of the safest investment avenues.

Why FD to plan your vacation?

Over the last two decades, investing in stocks and mutual funds has been preferred by most investors in India. However, when it comes to funding your travel plans, fixed deposits could also make for a good option for many reasons.

Earn interest on your money

When you book a fixed deposit, the banks/NBFCs offer a fixed rate of interest. This depends on the tenure and amount of the deposit. The interest rate is higher than that offered on a regular Savings Account. In a regular fixed deposit, interest is paid to you every quarter.

If you want to accumulate a corpus, then you can opt for a Compound or Reinvestment Deposit. In these deposits, the interest amount is not credited to your account but added to the principal. Hence, you earn interest on the FD interest thus reinvested.

You can also opt for a fixed deposit offered by a Housing Finance Company or a Non-Banking Finance Company. These are called Company Deposits.

Hence, if you are planning a vacation, then you can book a fixed deposit that matures around the time you intend to travel and allow the accumulated sum to earn interest. This can help reduce the pressure of managing the expenses of the trip.

Assured Returns

The biggest benefit of a fixed deposit is that it offers guaranteed returns since it is independent of the markets. So, if you book a fixed deposit that offers interest at the rate of 6% for one year, then at the end of the year, you will receive 6% on your invested amount regardless of what happens in the market. 

Also, read - How to Invest in FD

Varying tenures

There has been a surge in the number of people wanting to travel the world. In fact, many people have started planning extravagant foreign trips. Such trips are usually expensive. Hence, it is prudent to start planning them a few years in advance. Fixed deposits offer guaranteed returns for varying tenures. So, if you start planning your trip 30 months in advance, then you can book an FD for the exact tenure and earn optimum interest.

Flexible investment amount

Most financial institutions allow customers to book a fixed deposit from Rs.10,000 with no upper limit. Hence, even if you can save Rs.10,000 in a month, you can book an FD and start accumulating the corpus required for your desired vacation.

Instant liquidity

If you are planning to travel in 2-3 years, then the exact dates of travel will not be finalized until you book your tickets and make other reservations. While you can start saving for your vacation immediately, you will need access to your funds based on the date of travel. Hence, liquidity is an important aspect of investing in a vacation.

With a fixed deposit, you can liquidate your investment at any time. While a premature withdrawal might result in a small penalty on interest, you can be assured of having instant access to your funds when needed.

Summing Up

Adequate planning can make a vacation memorable. Hence, many people spend a lot of time researching the places they want to visit and the activities they would like to indulge in. At the same time, planning your finances for the vacation ahead of time can help ensure a stress-free trip. If you are thinking of taking a vacation, then use a fixed deposit and start planning for it today!

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