Fixed deposit gives you back some money off your original money while keeping the original money intact.
This means you get to keep what money you put in a Bank under the fixed banking service.
To refresh our minds a little a fixed deposit is a lump sum deposited with a bank for an agreed period of time, in exchange for interest.
How it is done
You will need to have an existing account with the bank of your choice, and then you deposit the sum you want to fix into this account. You will then need to inform your bank of your intention to “fix” the said sum for “X” number of months or years. At the end of the specified period you will get your money back along with the interest rate.
The money to be fixed is removed from your account and the interest is paid into your account monthly or at the end of the agreed period.
Just how much in Naira?
It is simple, Banks use your fixed money for their own investments, getting assets, investing in bonds etc. You’re then paid from the profit they made, in form of interest. The payment is based on the interest rate of your Bank.
The amount of money you get as interest depends on the interest rate of the Bank, though FD rates across all Banks in Nigeria are usually low especially when your money is in thousands, unlike Treasury bills where you get higher rates, it is still a good source of keeping your money intact and earning some money.
Most Banks like Stanbic offers 12% before tax, and Sky bank offers 10% before tax, so you see there are different rates for different banks, which means you need to do due diligence when choosing the Bank you want to fix your money, so as to earn more.
Let’s take Stanbic Bank at 12% per annum interest rate, and you fixed 500,000 Naira for 1 year, you will get 60,000 Naira, in 2years 120k, in 3years 180k and so on. Then tax will be deducted from the profut, the remaining is what you take home.
You can then decide to terminate it, and take your main money or you can decide to continue fixing it. Your choice.
The higher your Bank’s Interest rate the, the higher your profit, the lower your Banks Interest rate the lower your profit.
That it for fixed deposit, true you can not become wealthy doing it for a year, unless you have an insane amount of cash. But you can do it knowing that there are no risks involved, it will give you peace of mind for the number of months or years you keep your money with them, Plus you get to make some money off it too.