A recurring deposit is a type of deposit in which a fixed amount of money is invested at fixed intervals for a fixed duration of time. These installments can be monthly Corey Davis Shirt , quarterly or half yearly, but the standard practice is to have monthly installments. For example, a recurring deposit can be opened for a sum of Rs. 500 deposited on the 15th of each month for 15 months.
To put it simply, a recurring deposit is like having multiple fixed deposits which all mature on the same date. Most banks offer recurring deposits with a low minimum installment amount which makes it accessible for a wide range of people to invest their savings in. A recurring deposit is a very popular mode of short term goal based saving for people.
Like a fixed deposit Rashaan Evans Shirt , recurring deposit interest is calculated and compounded quarterly. Interest on each installment can be calculated using the compound interest formula which is:
A = P(1 + Rn)nt
A = Maturity amount P = Principal invested R = Rate of interest t = Tenure of the deposit
In this formula, usually the rate of interest is given annually. This has to be converted into the rate at which the interest is compounded. In case of a bank deposit, the interest is compounded quarterly. This means the annual rate of interest will have to be divided by 4 since there are 4 quarters in a year.
The tenure is usually given in months or years. For the purpose of the formula, the tenure is considered to be given in years and is multiplied by the number of quarters the deposit is on for. In case the tenure is given in months Delanie Walker Shirt , it has to be divided by 4 to find out the number of quarters.
This calculation has to be made for each month of the recurring deposit. For each successive month, the tenure calculation will keep reducing since the number of months that the installment is invested will keep reducing.
Using a recurring deposit calculator:
Manual calculations for recurring deposit interest can get very complicated and tedious. Doing these either manually or using a spreadsheet can throw up errors. But there is a simpler way of finding out the interest amount, i.e using a recurring deposit calculator. With advances in digital banking, most banks have made this calculator available on their websites for users to use. Now Marcus Mariota Shirt , there鈥檚 no need to make investments and then finding out the maturity value from the bank.
A recurring deposit calculator is a free tool that is offered by banks for users to calculate the maturity value of their recurring deposits. An RD calculator requires the following inputs:
鈥?Installment value 鈥?Date of opening recurring deposit 鈥?Tenure of recurring deposit 鈥?Senior citizen status
Once these inputs are fed into the calculator, you can see the maturity amount and the interest on the recurring deposit. In case of senior citizens, the rate of interest is usually 0.5% more than the regular interest rate.
Using an RD calculator can be very beneficial since it can help you plan your finances and to decide the tenure for the recurring deposit. A recurring deposit calculator usually has the rate of interest imputed in the calculator, however Amani Hooker Shirt , in case this is not already entered, you may have to manually enter it by taking the interest from the bank鈥檚 website. Using this calculator is extremely simple and will help you find the maturity value in a few clicks.
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