Calculating Net Gain of Term Deposit

Investing money in time deposit is a safe and guaranteed way to earn higher interest for your extra money. Term deposit or certificate of deposit is a bank product almost same to savings account but money on time deposit is on lock-in period before you can withdraw it.

One disadvantage of investing money in time deposit is that you will be charged a penalty if you get your money prior to maturity date. So you should not invest all your savings in term deposit, you must leave a particular amount of cash in your bank account.

One important thing in investing in term deposit is learning how to compute the interest you can receive in putting a particular amount of cash in a term deposit. After you learn the interest you will gain, you can have an idea what amount of money you will invest in time deposit.

Term deposit is one of the guaranteed investments you can do for your funds. In the Philippines, time deposit is insured up to P500,000, meaning you will not lose your capital invested in term deposit.

To calculate the total profit in term deposit, you may use the formula below:

Net Interest = [(principal x rate x days) / 365]*0.8

0.8 comes from 1 minus 20% withholding tax

For illustration: P2,630 = [(P1 million x 0.04 x 30) / 365 ]* 0.8.

From the formula above, you can observe that to increase your net gain in putting in time deposit, you must increase the days of time deposit and the capital you will invest. The interest rate of time deposit rest on the withholding duration. Definitely, the longer the duration, the higher the interest rate for time deposit will be.

Presently you can choose where to put your money based on the risk level and the percentage of net gain. Several investments are very risky, others are average or no risk at all. Investing in term deposit is one of the investments with no risk at all since it is insured by the government.

To get more information on how to make money and open a bank account at Canara Bank, you must go India Bank blog for helpful articles on saving, investments and make money online.