Future Proof Your Child’s Education: An RD Calculator Roadmap

In this article, we will discuss

It is a dream and goal for every parent to provide best-in-class education to their child. However, as one grows, meeting the rising education cost is no longer a child's play.

As a parent, you must have your savings sketched out at an early stage to meet different long-term goals for kids. This might include plans to create a deposit for high school and higher education. To meet these future goals without compromising with the present, a recurring deposit can be of great help. You can plan your child's education plan roadmap easily with the help of an RD calculator.

Wondering how this calculator can help future-proof your kids' education? Read this blog till the end.

What Is a Recurring Deposit?

Recurring Deposit is an important financial tool that allows you to regularly deposit a small amount every month to create a corpus large enough to fulfil your goals. RDs provide assured returns just like FDs, making it a suitable option for risk-averse investors looking for long-term savings.

To start a recurring deposit, you can connect with your bank or financial institution and choose a tenure suitable for your finances. Once your RD account is open, you must start investing a small amount every month till the tenure ends. Your invested amount will accrue interest through this period and you can withdraw it once the amount matures.

Recurring deposits are a great way for young people to inculcate a habit of savings. You can start a recurring deposit account with an amount as low as ₹10 to fulfil your financial goals.

Unlike fixed deposits, recurring deposits are more flexible and a go-to option for individuals aiming to maintain a disciplined financial approach to save money for the future. These savings can help you achieve long-term goals like funding your child’s education or creating an emergency fund for old age.

If you are a new parent, an RD can be a wise plan to set aside an amount to future-proof your kid's education. For comprehensive financial planning of your child's education, you can use an RD calculator. This will help you know your maturity amount at the end of your tenure and create a roadmap to secure your kid's future.

How Can Recurring Deposit Calculator Benefit Your Child’s Education?

Organising a child education plan can be overwhelming if you are unaware of where to start. Therefore, you need a road map to track your kid’s education journey beforehand.

It is here that a recurring deposit calculator comes into play. You can use this tool to determine the right amount that you need to deposit every month till you have saved enough to cover your child’s education expenses.

The points below will take you through the benefits of recurring deposits for your child’s future.

  • If you are a salaried individual and a new parent looking ahead to save for your child's education, you can consider RD. Unlike stocks, mutual funds and other market-linked investments, recurring deposit rates provide fixed and guaranteed returns. Market fluctuations do not affect RD interest; so there is no risk of losses.

  • People with low income can also start a recurring deposit by contributing amounts as low as ₹10 or ₹100. Upon maturity, this amount can fulfil the future goals surrounding their child's education. Unlike fixed deposits, you do not need to have a substantial lump sum to start an RD.

  • The amount which you are depositing or the principal amount will gather interest and compound over time. This amount can come in handy to meet short and long-term financial needs such as tuition fees and higher education fees for kids, marriage expenses and vacations.

  • Your bank or financial institution will set an interest rate for your RD at the time of account opening. This will stay constant throughout the tenure and will protect you from any kind of rate swings.

  • You can also open and handle an RD account on behalf of your minor including infants right after birth.

  • The maturity period for RD ranges from 7 days to 10 years. You can choose a long tenure to lock in a high interest rate providing you with long-term benefits.

  • To deal with an emergency, you can also opt for a loan facility pledging your RD as collateral. Most banks allow you to avail 80% to 90% of your RD corpus as a loan.

What Is an RD Calculator?

To plan a comprehensive child education roadmap, you must deposit an amount which will meet their educational expenses in the future. While deciding this amount, you must consider your present financial situation. This means, your principal amount must not burden your present finances while future-proofing your child’s education.

A recurring deposit calculator is an online tool that helps you decide how much you must invest in RD and for how long to receive the required maturity amount. This tool displays your RD maturity amount at the end of your tenure. With the RD calculator, you can get results instantly and accurately helping you decide how much your monthly investment towards RD must be.

Example of RD Maturity Deposit Calculation

To understand how an RD calculator computes your maturity amount, you must know how it works. Here is the mathematical formula to calculate the RD maturity deposit manually.

M= P x (1 + R/N)^(N x t)

Here,

P= Principal amount
R= Rate of interest divided by 400
N= Number of quarters your RD interest will compound
T= Total number of years
M= Maturity amount

Let’s see how this formula works with the help of a simple example.

For instance, Rajesh plans to start a recurring deposit of ₹5,000 per month for 10 years to finance his 10-year-old son's university education. If the bank offers 6% interest per annum, let's see what Rajesh's maturity amount will be at the end of the tenure.

To manually calculate Rajesh’s maturity amount, let’s place the data as per the formula above.

M= 5,000 x (1 + 0.015/120)^(120x10)
M= ₹8,22,145

So, as per the formula, for 10 years, Rajesh must deposit a total of ₹6 lakh as a recurring deposit. By doing so, he can secure his son's higher education with ₹8,22,145 on maturity.

Samco’s Recurring Deposit Calculator for Future Planning

As you can see, manually calculating recurring deposits requires a lot of effort and is time-consuming. To save time and effort, you can opt for Samco's online RD calculator. This is a free tool which anyone can use and know their RD maturity amount instantly. It leaves no room for errors and you can compare maturity amounts by entering innumerable combinations.

How to Use Samco’s RD Calculator?

You can follow the quick steps below to calculate the RD maturity amount using our online RD calculator.

Step 1: Enter your principal amount or monthly investment amount in the space provided. You can also drag the bar to your desired principal amount to go ahead with the calculation.

Step 2: Type the interest rate per annum that your bank or financial institution provides for recurring deposits for the particular tenure. You may also choose to drag the slider to the required interest rate.

Step 3: Enter the tenure for your recurring deposit to mature in years in the provided space. You can also drag the slider below to set the maturity tenure.

The Samco RD Calculator will display your total investment amount along with your expected returns and total maturity amount at the end of the deposit's tenure. It will also provide a graphical representation of the same for clear understanding.

How Can Samco’s RD Calculator Help You?

Here is how Samco’s Recurring Deposit calculato r can be beneficial to help you plan finances for your child’s education.

  • Comparative Analysis of Maturity Amount

Samco’s RD calculator displays the maturity amount, total investment amount and expected returns instantly. Therefore, you can enter endless combinations of the required parameters to know the investment amount suitable for your kid’s education roadmap.

  • Insights on RD Interest

While displaying the result, the Samco Recurring Deposit Calculator breaks down your maturity value to total investment and expected returns. This provides crucial information for further financial planning regarding your child’s education.

  • Let’s You Know the Maturity Amount

By entering the three important parameters, namely, principal amount, tenure and interest rate, the calculator will display your maturity amount. This calculation is quick and effortless and does not leave any room for error. With such quick results, the RD calculator helps in efficient planning to secure your child’s education future.

  • Get an Idea of Your Tax Implication

The RD calculator also provides insights into the potential tax benefits of your investment. The interest that you shall earn from your RD will be taxable as per your applicable slab rate. Thus you will know about your taxable interest while planning your child’s educational journey.

Taxation of Recurring Deposit

Like fixed deposits, banks charge TDS for interest earned through recurring deposits. They will charge TRD on your maturity amount under the following circumstances.

  • If your interest income is more than ₹40,000 (₹50,000 for general citizens) banks will charge 10% TDS. Below this limit, there will be no TDS deduction from your interest income.

  • However, if you did not submit your PAN details during account opening, banks will charge 20% as a TDS deduction from your interest. In this case, also your interest income must exceed ₹40,000 and ₹50,000 for both general citizens and senior citizens respectively.

The income made from recurring deposits is added to your taxable income and taxed according to the income tax slab you fall under. If your annual income is below ₹2.5 lakh, your RD interest income is tax-free. This implies you do not have to pay any tax on your maturity amount if your annual income is less than the lower limit for income tax slab rates.

Keeping these tax implications in mind, you can figure out a convenient RD investment that will not burden your finances. You can use our RD calculator to devise an accurate education planner for your child.

Which Is Better for Future Proofing a Child's Education- RD or FD?

To understand which is better to secure your child’s educational future between RD and FD, let’s take you through the differences between the two.

  • Duration

    The minimum duration for a fixed deposit is 7 days while for a recurring deposit, it is 6 to 12 months. However, the maximum deposit for both these schemes is 10 years. The tenure for the former is flexible between days to years while for the latter, it is fixed.

  • Returns

    To start a fixed deposit, you have to deposit a lump sum amount, while RD requires small deposits throughout the tenure. Consequently, FD brings higher returns than recurring deposits. However, starting an FD at an early stage of your career can be tough to manage. This makes RD a more convenient option in helping you get into the habit of disciplined saving.

  • Investment Frequency

    A fixed deposit requires a one-time investment for a tenure of your choice. Whereas, recurring deposit requires you to invest periodically in small parts throughout the tenure. This amount compounds quarterly to earn interest till it matures.

    Therefore, RD is a safer investment instrument among the two for people who lack surplus cash.

  • Investment Amount

    The investment amount for FD is higher than Rd. As for the latter, you can start your RD with ₹10 per month. However, you must deposit a lump sum amount to start an FD.

Final Words

The decision between which is better to future-proof your child's education between FD and RD depends on your financial scenario. If you are just starting a savings scheme to meet long-term goals like education, you are less likely to possess a surplus amount. In such conditions opting for FD can burden your finances. So you can go for a recurring deposit scheme to devise a roadmap for your kid's education.

Samco’s RD calculator will help you choose the right amount to start investing. You must note that this is a free tool and will not require any sensitive information or payments to calculate the maturity amount.

Frequently Asked Questions

1. Can I use Samco’s calculator to plan recurring deposits from different banks?

Ans. Yes, you can use the Samco RD Calculator to compare recurring deposit schemes of different banks and choose from them.

2. What are the documents I need to open an RD account?

Ans. To open an RD account, you must provide KYC documents, ID, address proof, application form and a passport-sized photo.

3. Does an RD account allow partial withdrawal of funds?

Ans. No, you cannot opt for partial withdrawal from RD. Unlike FDs, most banks do not allow premature withdrawal from recurring deposits.

Disclaimer: INVESTMENT IN SECURITIES MARKET ARE SUBJECT TO MARKET RISKS, READ ALL THE RELATED DOCUMENTS CAREFULLY BEFORE INVESTING. The asset classes and securities quoted in the film are exemplary and are not recommendatory. SAMCO Securities Limited (Formerly known as Samruddhi Stock Brokers Limited): BSE: 935 | NSE: 12135 | MSEI- 31600 | SEBI Reg. No.: INZ000002535 | AMFI Reg. No. 120121 | Depository Participant: CDSL: IN-DP-CDSL-443-2008 CIN No.: U67120MH2004PLC146183 | SAMCO Commodities Limited (Formerly known as Samruddhi Tradecom India Limited) | MCX- 55190 | SEBI Reg. No.: INZ000013932 Registered Address: Samco Securities Limited, 1004 - A, 10th Floor, Naman Midtown - A Wing, Senapati Bapat Marg, Prabhadevi, Mumbai - 400 013, Maharashtra, India. For any complaints Email - grievances@samco.in Research Analysts -SEBI Reg.No.-INHO0O0005847.

Tagged:

Download App to know your Andekha Sach

Get the link to download the app.

QR
Google Play Store App Store
Samco Fast Trading App

Leave A Comment?