The Sukanya Samriddhi Yojana (SSY) currently offers the highest interest rate among small savings schemes at 8.2% for this quarter, according to reports from Mint. This government-backed savings plan is specifically designed for parents saving for their daughter's future under the Beti Bachao Beti Padhao Yojana initiative. Parents can open an SSY account with as little as ₹250 and a maximum of ₹1.5 lakh annually, with the account requiring a minimum deposit to avoid a ₹50 penalty. The scheme offers tax benefits on both principal and interest earned, with the maturity period set at 21 years from account opening.
The National Pension Scheme's NPS Vatsalya Yojana enables parents to create retirement savings accounts for children with a minimum annual contribution of ₹1,000 and no upper limit, as reported by Mint. The scheme offers interest rates ranging between 9.5% to 10% and allows partial withdrawals for education, child's disability (more than 75%), and specified illnesses. At age 18, the account automatically converts to a standard NPS Tier I account, with the child able to choose between continuing the scheme or exiting with 80% as lumpsum and 20% as annuity. The maximum deduction limit is ₹50,000 under the old tax regime.
The Public Provident Fund (PPF) offers a fixed interest rate of 7.1% this quarter and requires a minimum deposit of ₹100-500 per month, according to Mint reports. The scheme features a 15-year lock-in period with accounts available through post offices, public banks, and private banks. Minor accounts can be opened by parents and converted to the child's name at age 18. The account can be extended in blocks of five years indefinitely, with partial withdrawals permitted only under specific conditions for the minor's benefit.
Bank deposits offer conservative investment options through child-specific recurring deposit plans with lower investment amounts and relatively higher interest rates, as reported by Mint. Popular FD schemes include PNB Balika Shiksha Scheme and Yes Bank Fixed Deposit for Children. Mutual funds for children function like regular mutual funds with flexibility in investment amounts and tenure, offering options like HDFC Children's Fund and ICICI Prudential Child Care Fund. These market-linked products carry slightly higher risk compared to government-backed schemes, though the MF sector in India remains regulated.
