In this unstable economy, being financially literate is a must; it’s not enough to set aside funds; you must also learn to invest and grow your savings. You could explore real estate or stocks, but before everything else, you need to understand the many factors that can affect your investment as well as its potential returns. This is where a term deposit calculator comes in since it can help you determine the two said factors and more. In this article, we’ll explore the benefits of using a term deposit calculator before investing so you can make informed decisions.
What Is A Term Deposit Calculator?
A term deposit calculator, as the name suggests, is a tool used to calculate the estimated interests and balance of your term deposit account. They do these by accounting for different factors like the principal amount, interest length, and term rate to determine how much you can earn and its respective interests.
It’s a handy tool for financial planning and can be easily accessed online so you can make a comparative analysis of your investments, weighing their pros and cons and making better financial decisions.
What Are The Benefits Of Using A Term Deposit Calculator?
Aside from knowing the interest and potential return of your investments, a term deposit calculator also offers many other benefits, such as the following:
Produce accurate interest calculations. When it comes to investing, many different factors at play make it difficult to determine the interest and return through simple calculations. Term deposit calculators use complex formulas and calculations to produce quick and accurate estimations of the two. You don’t need to do manual calculations anymore, which is not only time-consuming but also tiring and prone to errors. Furthermore, if you want to maximize your returns, it’s also ideal to learn more about how interest accrues when it comes to compounding. The term deposit calculator takes compound interest, besides the simple one, to show you how the numbers will also affect your returns.
Aid in scenario planning. Investments have many variables that affect one’s interests and returns, but the three most known factors that influence it are the principal amount, interest rate, and term length. Adjusting any of these three using the term deposit calculator can produce different investment scenarios. By doing so, you can have an idea of how any of the three factors can impact your final return by adjusting them. You can look up and see the difference between a 12-month term investment and a 24-month term and choose which works better for you.
Help comprehend compounding. Compound interest refers to the accumulated interest from the previous period. If you save money and are currently earning interest on your investments, then you’re also earning interest on the actual interest. The term deposit calculator can give you an idea of how much the interest earned in the previous period contributes to your future earnings. This allows you to appreciate the perks of long-term deposits.
Compare different offers. They say never put your eggs in one basket, which is why investors are always looking at various ways to spread their investments. One good way to do so is through multiple-term deposits through different banks. What makes this even better is that using a term deposit calculator can help you compare their offer side-by-side, helping you choose the most profitable option.
Why Should I Use A Term Deposit Calculator In My Financial Planning?
Although the main function of term deposit calculators is to compute interest and potential returns, we cannot highlight enough how helpful it is when it comes to providing you with other information for your financial decisions, such as the following:
Evaluate risk tolerance. Compared to other choices, term deposits are classified as low-risk investments. Be that as it may, it’s still crucial to understand the risks that come with it, like penalties from early withdrawals or inflation, which negatively affect your returns.
Help assess financial goals. Before you commit to investing in term deposits, you should have a clear definition of your financial goals; it could be as simple as saving for a new phone or maybe something grander like buying a new house. Whatever your financial goals may be, a term deposit calculator helps you determine if your investments are achievable within your desired timeframe.
Budget and planning. By having a general idea of what your potential returns are, you can incorporate these numbers into your financial planning, thus helping you make an informed decision about other investments.
Understanding long-term & short-term planning. Finally, one of the most important benefits of term deposit calculators is that they can give you a rundown on the differences between short-term deposits and long-term deposits.
Using a term deposit calculator is more than just computing your interests and potential returns; it’s a powerful financial tool that can help you improve your financial literacy, visualize the factors that affect your investment, compare different offers, and more.
