Is it a good idea for senior citizens to open a Fixed Deposit account?
There are many investment and savings options available to those aged 49 to 50 years and above – a fixed deposit account happens to be one of them.
But is it a good option? It definitely can be!
A fixed deposit account is safe and secure, with virtually zero-risks.
In addition, it can provide higher interest earnings than if you were to keep your money in a regular savings account.
Yes, the interest rates applied for FDs are generally higher than savings accounts.
Here are other reasons that make FD placements a potentially clever financial decision:
You can use it to pledge collateral
As a senior citizen, retiree or pensioner, you may find it a little more challenging to take out a bank loan such as a hire-purchase for a car or even small personal loans.
There may be age or income restrictions that keep you from securing the financing you need.
However, certain banks (not all) will allow you to pledge collateral in the form of an FD when you apply for such loans, to support your application.
You may stand a better chance of successfully getting a loan and perhaps, with good rates too.
To secure your money for a longer period
After years of working, you may have saved up a good amount of money, which can keep growing, when saved or invested responsibly. However, the temptation to spend instead of save is increased when it is too easy to withdraw.
This is usually the case when all your cash is stashed in a regular savings account.
Thus, it might be a good idea to place some of it in an FD to be held for emergencies, as you earn interests.
Now your money is working for you and not the other way around!
To enjoy added facilities
Certain fixed deposits provide added banking services and facilities that can be beneficial to you.
For instance, some accounts allow you an overdraft facility to borrow money against your FD.
With such a facility, you won’t have to break your FD account to access the cash you need.
You can typically borrow a partial amount or up to 100% of your FD placement (at lower interests), depending on the bank.
Other extras that might come with an FD include discounts on banking and insurance products, waivers for service charges, and more.
What to Look For in a Fixed Deposit Account
As you search for a worthy fixed deposit account to place your hard-earned cash, check that it comes with these features:
1. High interest rates
It’s important to scout for high interest rates, whether you are a senior citizen or not. This is because higher interests generally protect your money against inflation.
Also, the higher the interests the more you earn!
The average interest or profit rate in Malaysia for FDs is between 2.5% and 4%. Thus, rates higher than these would be considered high interest.
2. Flexible or shorter tenures
You may want to place your money in a fixed deposit account for a shorter period, perhaps just one year or even lesser.
Some fixed deposit accounts offer tenures of just one month.
This is a good option for senior citizens, retirees or pensioners who may have access to large sums of money but don’t want it tied up for long periods.
3. Smaller early withdrawal penalties
If you are worried that you may need to withdraw your money for emergencies like medical bills or other unexpected events, look for an account that won’t penalise you for early redemptions.
Some banks give leeway for early redemptions where you won’t lose your interest earnings or where you’ll still be able to earn partial interests.
There may be conditions applied such as how much and how early you may withdraw to maintain your interest earnings.
4. Low minimum deposit
If you don’t have a lot of money to put into a fixed deposit account or if you would like only to place a smaller amount, seek out accounts that offer low minimum deposits.
This way, you can still save and earn interests without tying up all of your money.
5. Regular interest crediting
If you’d like to see the fruits of your savings early on, check for fixed deposit accounts that will pay out interests regularly.
Some banks may credit interests earned into your savings account on a monthly basis, so you may access earnings much more frequently.
Depending on how much you’ve placed in the account and the interest rate applied, you may just see a good sum paid out!
Top 3 Fixed Deposit Accounts for Senior Citizens
Looking for good fixed deposit accounts to meet your needs as a senior citizen or retiree? Here are our top picks:
1. Hong Leong Senior Savers Flexi FD
This FD is currently offering a high promotional rate of 3.30% per annum for new fund placements of RM10,000 (minimum), with 12-month tenure.
What’s more, you can make early partial withdrawals in multiples of RM3,000 (with conditions) without losing interest earnings on the balance.
However, do note that this FD can’t be used as collateral for the overdraft facility.
2. AmBank Am50Plus Fixed Deposit
If you are looking for a shorter tenure fixed deposit account, this one offers medium to long-term options from as little as six months to five years.
What’s more, you can get started with a minimum placement of just RM5,000.
The account is also very convenient as it automatically credits profits earned to your savings or current account.
Moreover, your profits are credited on a monthly basis until it reaches maturity, so you can have quicker access to earnings!
At present, the profit rate offered is 3.40% per annum for the minimum placement.
3. RHB Senior Fixed Deposit
Enjoy greater flexibility with this fixed deposit account as you may make partial withdrawals in multiples of RM1,000 (with conditions) without losing your interest earnings on the balance.
This account will also waive commissions or service charges for the first five cashiers’ orders and demand drafts.
The interest rate currently offered is 3.40% per annum for a minimum placement of RM10,000. But what’s interesting is that with tenures of more than 12 months, interests are negotiable!
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