Explore the best investment plan for girl child in India, designed to secure her future with tailored financial strategies and savings options.
As a parent, you want to secure the future of your girl child and provide her with the best opportunities for education, career, and marriage. However, with the rising costs of living and inflation, saving money for your daughter’s goals can be challenging. That is why you must invest wisely and plan for her financial needs.
There are various investment options available for a girl child in India, each with its own features, benefits, and drawbacks. Depending on your risk appetite, time limits, and expected returns, you can choose the most suitable option for your daughter.
Investment Options for Girl Child in India
Here are some of the best investment options for your girl child in India:
Sukanya Samriddhi Yojana (SSY)
SSY is a government-sponsored scheme that aims to encourage parents to save for their girl child’s education and marriage. You can open an SSY account for your daughter before she turns 10 years old and invest up to Rs. 1.5 lakh per year for 15 years. The account matures when your daughter turns 21 years old or gets married, whichever is earlier. This is one of the best investment plan for girl child in India.
The main advantages of SSY are:
- It offers a high interest rate of 8.1% per annum, which is revised quarterly by the government.
- It provides tax benefits under Section 80C of the Income Tax Act, 1961. The interest earned and the maturity amount are also tax-free.
- It allows partial withdrawal of up to 50% of the balance for your daughter’s higher education or marriage after she turns 18 years old.
The main drawbacks of SSY are:
- It has a long lock-in period of 21 years, which may not suit your daughter’s goals or needs.
- It has low liquidity, as you can only withdraw money for specific purposes and after meeting certain conditions.
- It has a low flexibility, as you can only invest in one SSY account per girl child and cannot switch to other schemes.
National Savings Certificate (NSC)
This is a fixed income investment scheme that can be purchased from any post office in India. The scheme has a tenure of 5 years and offers an interest rate of 6.8% per annum (as of January 2021) compounded annually. The minimum investment amount is Rs. 100 and there is no maximum limit. The investment and the interest earned are eligible for tax deduction under Section 80C of the Income Tax Act. The scheme also allows the option of reinvesting the interest earned in the subsequent years. The main benefits of this scheme are tax benefits, guaranteed returns, and easy availability. The main drawbacks are a long lock-in period and low liquidity.
Unit-Linked Insurance Plan (ULIP)
This is a plan that combines insurance and investment in a single product. The premium paid by the policyholder is partly used to provide life cover and partly invested in various funds such as equity, debt, or balanced funds. The policyholder can choose the fund option and the allocation as per their risk appetite and financial goals. The returns from the investment depend on the performance of the chosen funds. The policyholder can also switch between the funds or make partial withdrawals as per their convenience. The premium and the maturity amount are eligible for tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, respectively. The main benefits of this plan are dual benefits of protection and investment, flexibility, and tax benefits. The main drawbacks are high charges, market risks, and long-term commitment.
Child Plans
These are designed to secure the child’s future in case of the unfortunate demise of the parent or guardian. The plan provides a lump sum amount to the child on the death of the parent or guardian and waives off the future premiums. The plan also provides a maturity amount to the child on the completion of the policy term, which can be used for the child’s education, marriage, or any other purpose. The premium and the maturity amount are eligible for tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, respectively. The main benefits of this plan are protection, guaranteed returns, and tax benefits. The main drawbacks are high charges and a long-term commitment.
Mutual Funds Investments
Mutual funds are pooled investments that invest in various securities such as stocks, bonds, gold, etc. You can invest through SIP in mutual funds, where you invest a fixed amount every month or quarter for a predefined period. You can also invest in children’s gift mutual funds, which are specially designed for saving for your child’s future.
The main advantages of mutual funds are:
- They offer higher returns than traditional savings schemes, as they invest in diverse and growth-oriented assets.
- They provide tax benefits under Section 80C of the Income Tax Act, 1961, if you invest in equity-linked savings schemes (ELSS) or children’s gift mutual funds with a lock-in period of 3 years or more.
- They allow high liquidity, as you can withdraw or redeem your units at any time, subject to exit load and capital gains tax.
- They allow high flexibility, as you can choose from a wide range of mutual funds based on your risk profile, investment objective, and time horizon.
Fixed Deposits
Fixed deposits are deposits that offer a fixed rate of interest for a fixed period of time. You can open a fixed deposit account for your daughter at any bank or post office and invest a lump sum amount for a tenure ranging from 7 days to 10 years. You can also opt for a cumulative or non-cumulative interest payout option.
The main advantages of fixed deposits are:
- They offer a guaranteed and stable return, as they are not affected by market fluctuations and uncertainties.
- They provide safety and security, as they are backed by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs. 5 lakh per depositor per bank.
- They allow partial withdrawal or premature closure of the account, subject to a penalty or lower interest rate.
The main drawbacks of fixed deposits are:
- They offer a lower interest rate than inflation, which reduces your real returns and purchasing power.
- They do not provide any tax benefits, unless you invest in tax-saving fixed deposits with a lock-in period of 5 years.
- They have a low flexibility, as you cannot change the interest rate or tenure of the deposit once it is fixed.
P2P Investments
P2P investments can be considered as an alternative to fixed deposits and mutual funds investments. Fixed deposits have lower risk, but returns are also low, while mutual funds are high risk high return investment. P2P investments here can offer a better choice which can offer you average 11-14% returns annually, with limited risk. This is a new investment option available in India and before investing one needs to understand both the risks and returns of P2P investments.
At the end, each option has its own pros and cons, depending on the factors like interest rate, tax benefits, liquidity, flexibility, risk, and tenure. The article suggests that parents should choose the option that best suits their daughter’s needs and goals, as well as their own financial situation and preferences.
