Understanding Your Recurring Deposit (RD) and Savings Planning
Our RD Calculator helps you quickly estimate your maturity amount, total interest, and plan your savings effectively.
What is RD?
RD stands for Recurring Deposit. It is a special kind of term deposit which helps people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits.
Understanding your RD is crucial for disciplined savings and achieving your financial goals, as it provides a predictable return on your regular investments.
How RD is Calculated
The RD maturity amount calculation depends on three main factors:
-
Monthly Deposit Amount (P)The fixed amount of money deposited every month.
-
Interest Rate (R)The annual rate at which interest is earned on the deposit. For RD calculation, this is usually compounded quarterly.
-
RD Tenure (N)The total period in months for which the RD is maintained.
The formula commonly used for RD maturity amount (compounded quarterly) is approximately:
$$M = P \times \frac{(1 + i)^{n \times 4} - 1}{1 - (1 + i)^{-1/3}} \times (1 + i)^{1/3}$$
or simplified for monthly deposits with quarterly compounding:
$$M = P \left[ \frac{(1+R/4)^{N/3} - 1}{1 - (1+R/4)^{-1/3}} \right]$$
Where:
- $M$ = Maturity Value
- $P$ = Monthly Installment
- $R$ = Annual Interest Rate (as a decimal)
- $N$ = Total Tenure in Quarters (Years * 4)
- $i$ = Quarterly Interest Rate ($R/4$)
- Note: For simplicity, many calculators use a monthly compounding approximation.
Understanding the Maturity Schedule
A maturity schedule provides a year-wise breakdown of your total deposits, the interest earned, and the cumulative maturity value. This helps you track your savings growth over the RD tenure.
This schedule helps you visualize your savings progress and understand the power of compounding interest on your regular deposits.