How To Build Wealth With Recurring Deposits: A Brief Guide

24^th Jun 2025...

Many people want their money to grow fast but don’t want to take big risks. While aiming for high returns can sound exciting, it often means taking on more risk. Finding an option that offers good returns with low risk isn’t easy.

This is where Recurring Deposits (RDs) come in. They give you a safe and steady way to grow your savings without worrying about market ups and downs. By saving small amounts regularly, you build a habit of saving and earning guaranteed returns to help you reach your financial goals.

The working of recurring deposits

A Recurring Deposit (RD) is a type of savings option offered by banks and financial institutions where you deposit a fixed amount of money every month for a specific period. Here’s a step-by-step explanation of how RDs work:

1. Monthly deposits:

You choose a fixed amount (starting as low as ₹500 in most cases) to deposit every month into your RD account. The deposit is automatic, making it easy to maintain without manual intervention.

2. Fixed tenure:

You choose how long you want to save, usually between 6 months to 10 years. This fixed period helps you plan your savings for specific goals.

3. Interest calculation:

The bank adds interest to your RD every three months, helping your money grow faster than a regular savings account. The interest rate stays the same for the entire period, so you don’t have to worry about market changes.

4. Maturity amount:

Once the saving period ends, you get back all the money you saved, plus the interest earned. This lump sum can be used for short-term needs and emergencies or to invest further in bigger goals.

Advantages of recurring deposits for wealth accumulation

If you are looking to meet some financial goal, then you can consider recurring deposits. The reasons being:

1. Better interest rates

Recurring Deposits (RDs) offer higher interest rates than regular savings accounts. Senior citizens often get extra benefits. Since the interest rate stays fixed, your returns won’t be affected by market ups and downs. This makes RDs a safe way to grow your money.

2. Encourages financial discipline

With RDs, you save a fixed amount every month. It helps you build a habit of regular saving, which is key to growing wealth. Since the money is deducted automatically, it’s easier to save and avoid unnecessary spending.

3. Stable returns

RDs give guaranteed returns, unlike market-based options like mutual funds. This makes them perfect for those who want safe and predictable growth. You know exactly how much you’ll get at the end, so you can plan your expenses better.

4. Flexible tenure

You can choose how long you want to save, from 6 months to 10 years. This flexibility lets you match your savings plan to your goals, whether they’re short- or long-term. You can even open multiple RDs with different durations for different needs.

Example: Save for education with the power of compounding of RD

Let’s say you’re planning to save for your child’s education over the next 3 years. You estimate you’ll need around ₹1,30,000 to cover tuition fees or related expenses. Instead of taking a loan, you decide to start a Recurring Deposit (RD) to reach this goal. Here’s how:

Monthly investment: ₹3,500

Tenure: 3 years (36 months)

Interest rate: 7% (compounded quarterly)

How it works

Each month, you save ₹3,500 in your RD account. This money earns interest and the interest is added to your balance. Since the interest gets compounded every 3 months, the interest you earn also starts earning more interest as time passes.

Results

Total deposited amount: ₹1,26,000 (₹3,500 x 36 months)

Interest earned: Approximately ₹14,700 (depends on compounding schedule and exact rates)

Maturity amount: ₹1,40,700

This way, you can achieve your goal without financial stress or borrowing. This shows how an RD, with its guaranteed returns and compounding benefits, helps you save securely.

Work towards your financial goals with the Kotak811 Savings Account

You can easily set up a Recurring Deposit in your Kotak811 Savings Account and start saving in a structured, hassle-free way. Automating your monthly savings ensures you stay disciplined while earning attractive, stable returns.

The power of compounding helps your money grow steadily over time, making it perfect for meeting goals like a dream vacation, emergency fund or future purchases. With Kotak811, saving becomes simple, rewarding and stress-free helping you build wealth one step at a time.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.