Is Fixed Deposit Worth It?

Over time, I have realized that information is power, but the application or the utilization of the information is what matters.

I recently went to one of the banks to make inquiries about Fixed Deposit account, the response I got made me ponder, why Nigerian banks are just using us to enrich themselves via business.

This post is not intended to discourage anybody from opening Fixed Deposit account, after all, it’s a risk-free form of investment. Rather the focus is to give you an insight about Fixed Deposit account if at all you are interested in venturing into that kind of investment.

It is when you have the right information and knowledge, then,  you would be able to make good decisions. I have always emphasized seeking the knowledge first before investing your money.

Against the perception that Fixed Deposit account is for someone who has money in millions.  With a hundred thousand,  you could get your Fixed Deposit account. In the same vein, I thought the interest on FD account was too juicy, not until when I discovered.

United Bank for Africa (UBA Bank) pays you five percent interest for a minimum of thirty days. To break it down,  I asked the UBA staff,  “if I start with the sum of 100,000 Naira for 12 months, what would be my interest.” She said 5,000. I was marveled.

“So,  if I leave that huge amount of money for one year, I will only get 5,000 return! , I exclaimed.

After my conversation with her, I left the bank.  I was wondering if she wanted to say 5,000 per month as interest. Even at that,  it’s still meager in my view.

I needed to satisfy my curiosity; I went to First Bank of Nigeria. The case wasn’t significantly different from what I have been told earlier. I  asked the same question,  the First Bank staff told me 6,500 Naira after deducting a particular fee.

I tried to analyze this situation. If the bank lends you that same amount (N100, 000), will they charge you 5,000 as the interest?

If that were to be the case, then unemployment rate and poverty would have been reduced to the barest minimum. This is because a lot of people will be willing to borrow from the banks and finance their businesses.

Although money is not usually the driving force or the most challenging problem in entrepreneurship, but lots of business ideas have gone down the drain because of finance.

I think it’s high time Nigerian banks start looking at this critical issue and position themselves as an agent of poverty eliminator, instead of indirectly exploiting us.

This would depend on certain factors and who you are as a person.

Keeping all your funds in FDs will not help you generate high returns in the long run but another form of high-risk investment will.

Apparently, from what is obtainable in Nigeria banks and probably the rest of the world, there is no guarantee for big returns.

The truth is that times are changing and investors are looking towards other investing options to that will generate higher returns like mutual funds, equity, etc. depending on how far you are willing to risk your money.

In some cases, it is wise to keep some of your money in Fixed Deposits and scout for other alternative investments to diversify.

For me,  the returns on FD is extremely poor and could discourage someone like me from investing. On the second thought, the returns may not be so high, but the certainty and surety of returns are what usually attracts investors to having FD account.

In the real sense, this kind of account or investment is best suited for conservative investors who are not willing to take any risk and are happy with average returns only.

If you’re interested in this kind of investment, it’s easy.  Just visit any of the banks or your bank,  tell them you’re interested in opening a Fixed Deposit account.

If you already have an account, let’s say Savings account, all they need to do is to debit your account and transfer it to the Fixed Deposit account.

However,  you will need to fill a foam to make this happen.

    * FD is considered as a safe investment option for decades.

    * You can earn a maximum of 7–8% return on Fixed Deposits based on the type of FD and period of Fixed Deposit.

    * You get fixed returns from FDs.

    * Returns from Fixed Deposits are assured and no risk attached.

    * Interest on Fixed Deposit is fully taxable.

You have seen the good and the bad constituents of an FD account.

If you’re a risk taker, then, this is the wrong segment to venture. But you are not, then,  you could give it a trail.