Bank deposits are a way to save accumulated money from the unpleasant effects of inflation. The point of using this tool is simple. In 2010, with the officially recognized inflation rate of 8.8%, real inflation, according to some estimates, amounted to about 16%. Bank deposits help to smooth out this depreciation of funds and make the impact of inflation less noticeable.
It is necessary
access to the Internet and websites of different banks to choose from
Instructions
Step 1
Choosing a bank
The official website of any bank contains all the necessary information about products and services. We follow the link "Deposits" and get acquainted with the various conditions. We have to make a choice based on the term of the deposit, the interest rate, the order of capitalization of interest and the possibility of early withdrawal of funds. Of course, deposits have other characteristics as well, but for most people these four parameters are the most important.
Step 2
Choosing the term of the deposit
The most common terms of validity of bank deposits are from 6 months to 2 years. In order to understand how much the invested amount will grow, we will choose the term of the deposit, equal to 1 year. The final inflation is calculated exactly for the year. Comparing two digits is easy.
Step 3
Choosing a deposit at an interest rate
The spread of interest rates on deposits depends on several factors. The rate is influenced by the term of the deposit, the possibility of early withdrawal of money, and the amount of the deposit. In order to save money from inflation, we choose the rate at the level of 8-10% per annum.
Step 4
Choosing the frequency of interest payments and capitalization
Usually, the payment of interest on the deposit occurs either once a month or once a quarter or once at the end of the term. It is good if the bank gives you a choice: pay interest to a separate account or add it to the principal amount of the deposit. Both options have their advantages.
When paying interest to a separate account, you can withdraw and spend it without restrictions. But we will choose the second option, as it is somewhat more profitable. The addition of interest to the principal amount of the deposit is called capitalization.
The rationality of the choice of capitalization lies in the fact that after the addition of interest to the principal amount of the deposit in the new period, interest will be charged on the increased amount of the deposit. As a result, on deposits with capitalization, the amount of money growth will be higher. Since in this case, the increase in the amount of the deposit will already occur according to the compound interest formula.
Step 5
We choose the possibility of early termination of the contract
If it is necessary to terminate the deposit agreement, we need to preserve the lost interest as much as possible. Some banks do not pay interest for the use of money in case of early withdrawal of the deposit. The best choice would be to terminate the contract a few days after the next interest payment. In this case, we only lose interest for the days that have passed since the last payment.
We hope that our advice will help you to properly keep your savings from impairment. And if you manage to find an interest on the deposit that exceeds the official inflation, then you can even earn a little extra money on such an investment.
