Download App app-link

Three investment options to secure your child’s future

Three investment options to secure your child's future

For parents, saving for their children’s future is at the top of their priority list. That’s right. A good course at a good university can put a child’s career on the right track.

While there are several investment options to help secure your children’s future, here are the top three:

Sukanya Samriddhi Yojana (SSY): For girls only.

  • Equity Income Funds (MF): for sons and daughters.
  • Public Welfare Fund (PPF): for sons and daughters.


Since both are debt instruments, we will discuss them together (although Sukanya Samriddhi is only available for girls).

In terms of interest rates, SSY at 7.6% is better than PPF at 7.1%. But that shouldn’t be the only reason to choose SSY over PPF.

An SSY account can be opened for a girl up to the age of 10. She lasts for 21 years (or ends after marriage). Deposits are possible up to the age of 15 years. The SSY corpus always generates returns from year 16 to year 21. Additional payments cannot be made between the ages of 16 and 21.

The entire SSY corpus is locked until the girl turns 18. After that, only up to 50% of the amount can be used for educational purposes. As such, liquidity can be an issue. What if your daughter’s higher education requires more money than the 50% available from the SSY corpus? They have more there but it’s not available when you need it.

However, SSY has some merits and offers better tax-free returns. But if liquidity is an issue after the 15th year, it is also advisable to have a PPF account as one can withdraw funds from their PPF account after 15 years. The PPF offers more flexibility and can be used as an investment vehicle even after the daughter marries or closes her SSY account.

Equity MFs

But neither PPF nor SSY is the best option when your daughter’s college goals are several years away. Why?

In fact, both the PPF and the Sukanya are long-term debt instruments. With the high cost of education and current inflation, savings in SSY and PPF alone may not be able to keep up with inflation. The result will be insufficient savings. And that is something that you, as a parent, would never want.

Sound investment logic dictates that when investing for the long term, it is best to invest more in stocks, as this is the only viable option for long-term returns that exceed inflation. Doing this through a disciplined SIP (systematic investment plan) in stock funds is the best option.

How do you divide your money between MF, SSY, and PPF?

Here are some basic rules to keep in mind:

  • If you are ultra-conservative and your goals are for 15+ years, keep it simple and give SSY and PPF at 100%.
  • If your children are older, the long block times of SSY and PPF may not meet your target needs. In this case, you can opt for some MF debt.
  • If you have a moderate risk appetite, allocate 50% to equity funds and split the remaining 50% between SSY and/or PPF.
  • For moderately aggressive to aggressive investors, this can be 80-100% equity funds and the remainder (if any) SSY/PPF.

If you’re looking for hard numbers to suggest how much you should invest, here are a few:

  • If you need to accumulate Rs 75,000 in 15 years, invest Rs 18,000-19,000 per month in an 80:20 MF: DBT stock split.
  • If you need to accumulate Rs 50,000 in 10 years, invest Rs 24,000-25,000 per month in a 65:35 MF: Debt Equity Grant.
  • If you need to accumulate Rs 35,000 in 6 years, invest Rs 36,000-37,000 per month in 40:60 MF: Debt Allocation.

So the sooner you start, the better. For example, if your goal is to reach Rs 50,000 in 10 years, you need to invest Rs 24,000-25,000 per month at a rate of around MF 65:35 – Debt Allowance. But if you start earlier and have 15 years to reach the same goal, you only need to invest Rs 12,000-13,000 per month.

Insurance is also important, but it is not enough to invest enough every month, God forbid something happens to you. Be sure to get comprehensive term life insurance that not only provides enough money for your children’s college education and marriage, but also for daily household expenses (if you are the sole breadwinner), children’s education, children and other similar goals. buy a house etc.


Recent Posts