Saving for education and marriage of the girl child is among one of the major goals for parents. When it comes to investing in a scheme for their children, parents need to choose the instrument that gives the best returns.
Under its ‘Beti Bachao Beti Padhao’ campaign the government had launched Sukanya Samriddhi Scheme in January 2015, and it is one of the most recommended saving schemes for the girl child.
Experts though believe that one shouldn’t park the entire money for the girl child in this scheme and should keep a small portion for instruments such as public provident fund (PPF). SSS offers an interest rate of 7.6%, while PPF offers an interest rate of 7.1% for the quarter ending 31 March. The interest rates are revised quarterly. Therefore, there is a differential of 50 basis points. One basis point is one hundredth of a percentage.
“When it comes to PPF versus Sukanya, I prefer to go with Sukanya. Mainly because it has a higher interest rate than the PPF and hoping it will continue in the future also,” said Basavaraj Tonagatti, a Sebi-registered financial adviser. However, to have the flexibility of investing in debt for the daughter’s future, then I suggest having PPF also. The reason is that Sukanya will close once the child turns 21 years of age. “However, once the PPF completes the first 15 years, then PPF offers huge flexibility and liquidity throughout the life of a child. Hence, the major portion should be in Sukanya and to take advantage of the early start of PPF, a small portion in PPF,”
Under SSY, a parent or guardian of a girl child, between age zero and 10 years, can open an account in the child’s name. Deposits can be made on a monthly or yearly basis for 15 years from the date of opening the account. Investments can’t be made after the 15-year period, but the account keeps gaining interest for the next seven years and matures after 21 years. You can withdraw only after the child turns 18 years, subject to certain conditions. Both PPF and Sukanya schemes qualify for deduction under Section 80C and fall under exempt-exempt and exempt brackets.
However, experts also feel that parents should invest in instruments such as mutual funds and not limit to debt-oriented products such as Sukanya Sumridhi and PPF. Instead of limiting investments to one instrument, it is a good idea to diversify your investments.
