As a parent, you want the best for your child’s future, especially when it comes to securing their financial needs. With so many investment options available, it can be a bit confusing to choose the right one. In this blog, we will look at three popular investment schemes for children – Sukanya Samriddhi Yojana (SSY), NPS Vatsalya, and Children's Funds. We'll break down each option in simple terms, provide examples, and talk about potential returns. Let’s make it easier to decide!
1. Sukanya Samriddhi Yojana (SSY): A Government Scheme for Your Daughter’s Future
What is it? Sukanya Samriddhi Yojana is a savings scheme designed specifically for the girl child. It's backed by the government, which means it’s super safe, and the returns are quite attractive. You can open an account for your daughter before she turns 10, and invest up to ₹1.5 lakh annually.
How does it work? You invest a small amount each year, and the account earns interest (currently 8.2% per annum). You can continue contributing until your daughter turns 15, and the maturity is at 21 years of age. The best part? The interest earned is compounded, meaning you earn interest on your interest!
For Example- You invest ₹1 lakh annually for 15 years for your daughter’s future.
Start age: When your daughter is 3 years old.
Investment duration: You invest until she turns 18 (15 years).
Total investment: ₹15 lakhs.
Expected returns: With an 8.2% interest rate, your total corpus would grow to approximately ₹46.4 lakhs by the time she turns 21.
Returns: Interest rates fluctuate, but currently, it's at 8.2%, which is great for a government-backed scheme.
2. NPS Vatsalya: A Retirement-Like Plan for Your Child’s Future
What is it? NPS Vatsalya is a scheme under the National Pension System designed to help parents plan for their child’s long-term financial security. Though it’s primarily aimed at retirement, Vatsalya allows you to set aside money that your child can use once they’re older.
How does it work? You contribute regularly (either monthly or annually), and the money is invested in a mix of equity, government bonds, and other safe instruments. Over time, this mix allows your investment to grow significantly. The scheme is flexible – you can choose how much risk you want to take by selecting equity exposure.
For Example- You invest ₹10,000 per month into the NPS Vatsalya scheme.
Start age: From the time your child is born.
Investment duration: You invest for 18 years.
Total investment: ₹21.6 lakhs over 18 years.
Expected returns: Assuming a 10% average return, the corpus could grow to around ₹46 lakhs by the time your child turns 18.
Returns: Depending on your risk preference, returns can vary from 8% to 10% annually. Keep in mind that equity-based investments can fluctuate, so long-term investment is key here.
3. Children's Mutual Fund: A Flexible Investment Option
What is it? Children’s Funds are mutual funds specifically designed for child-centric goals like education or marriage. These funds invest in a mix of stocks, bonds, and other instruments. You can start small and contribute regularly through a Systematic Investment Plan (SIP), which makes it convenient and affordable.
How does it work? You can start investing in a children’s fund even with as little as ₹1000 per month. These funds come with a lock-in period, ensuring you don’t withdraw the money early. The flexibility is in how much risk you’re willing to take – you can choose funds that are more aggressive (higher in equity) or more conservative (higher in bonds).
For Example- You start a SIP of ₹5,000 per month for your child’s future.
Start age: When your child is 5 years old.
Investment duration: 13 years, until your child turns 18.
Total investment: ₹7.8 lakhs over 13 years.
Expected returns: With a 12% annual return, your investment can grow to ₹16 lakhs by the time your child is 18.
Returns: Children’s mutual funds tend to offer higher returns, ranging between 12% to 13% annually, depending on market performance.
Each of these investment options has its own benefits. Sukanya Samriddhi is perfect for those who want a safe and government-backed option for their daughter. NPS Vatsalya provides flexibility and long-term growth, ideal for broader financial goals. Children’s Funds are great for parents willing to take a bit more risk for higher returns.
Remember, starting early and contributing regularly are key to growing your savings. Choose the one that aligns with your financial goals, and you’ll be setting your child up for a bright future!
Popular on Finoster
.jpg)
