Build a fund worth lakhs by saving small amounts monthly; understand the math behind a Post Office RD.

Post Office Investment: You can start investing in a Post Office Recurring Deposit (RD) with as little as ₹100 per month. Currently, it offers an interest rate of 6.7%. Depositing ₹9,500 monthly could yield approximately ₹6.78 lakh over five years.

Post Office RD News: If you wish to build a substantial fund for the future by investing a small portion of your earnings each month—without taking any risks—the Post Office RD could prove to be an excellent option. These schemes offer the benefit of earning fixed interest alongside regular deposits. However, maintaining patience over the long term is crucial to achieving better returns with this type of investment.

What is this government scheme?

This is the Post Office Recurring Deposit (RD) scheme. You can start investing in this scheme with a minimum monthly deposit of ₹100. There is no upper limit on the investment amount, meaning you can deposit a larger sum based on your financial capacity. However, if you continue investing over a long period, your accumulated deposits—combined with the interest earned—can gradually grow into a substantial fund.

What is the interest rate on Post Office RD?

The Post Office RD currently offers an annual interest rate of 6.7%. Since the government revises interest rates periodically, it is advisable to check the current rate before investing. A key feature of this scheme is that it requires only small monthly deposits, eliminating the need to arrange a large lump sum upfront.

How large a fund will be created by depositing ₹9,500 per month?

If you deposit ₹9,500 per month in a Post Office RD, your total deposited amount over five years would be ₹5,70,000. However, based on the current interest rate of 6.7%, this amount could grow to approximately ₹6.78 lakh after five years. If you continue investing for a longer period beyond this, the power of compounding can help your fund grow even larger. Based on the calculations, the fund could reach approximately ₹16.23 lakh after 10 years.

Total deposit over 10 years: ₹11.40 lakh
Estimated interest earnings: Approximately ₹4.83 lakh
Total fund after 10 years: Approximately ₹16.23 lakh
However, the actual amount may vary depending on the interest rate, the date of deposit, and the scheme's prevailing rules.

Minors can also open an RD account

A key feature of the Post Office RD is that an account can be opened in the name of a minor. However, parents or legal guardians can operate such an account on the child's behalf. Additionally, the rules allow for the opening of a joint RD account.

Points to consider before investing

Deposit the fixed amount regularly according to the scheduled installment dates.
Assess your income and expenses before starting the investment.
Determine the investment amount based on the tenure and your specific needs.
Interest rates are subject to change over time.
Familiarize yourself with the Post Office's current terms and conditions before planning any investment.