Sukanya Samriddhi Yojana vs Mutual Funds: Which Is The Best Child Investment Plan In India

Every parent dreams of giving their child the best life. Your child's dreams are priceless, but turning them into reality needs a solid financial foundation.  

But when it comes to investment plans, which one should you choose? What is the best option for your daughter’s education? Here, we compare Sukanya Samriddhi Yojana and Mutual Funds.  

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Sukanya Samriddhi Yojana (SSY) 

SSY is a government-sponsored investment scheme for parents with daughters, which was launched on 22nd January 2015 as part of the Beti Bachao, Beti Padhao Campaign. After the birth of the girl child, parents can open the account immediately, till 10 years. The minimum deposit is ₹250, with an annual limit of ₹1,50,000.The excess amount invested will be returned without interest, deposits can be made up to 15 years of opening the account. The scheme guarantees an interest rate of 8.2%, and the account matures after 21 years. If the account holder turns 18 or completes 10th standard, they can apply for withdrawal of up to 50% of the balance, specifically for educational purposes.  

The scheme enjoys the tax-free benefit, with the Exempt-Exempt-Exempt (EEE) tax status. Even the interest earned on the SSY account balance is fully exempt under section 10 of the Income Tax Act. 

Mutual Funds 

Children's fund plans are mutual funds designed to help for planning their child's financial future, given the rising cost of education and essential expenses. Such plans come with a five-year lock-in period and are strictly designed to prevent premature withdrawals. Children's funds operate by investing your funds in a pool of equity and debt instruments. However, the allocation depends on different fund managers. These mutual funds are considered long-term and capitalise on the power of compounding. This protects the investor against market volatility.  

Let's take a look at some.  

1. SBI Magnum Children's Benefit Fund 

This is an open-ended investment fund for children, with a lock-in period of at least 5 years or until the child attains the age of majority. The scheme has given 33.93% returns in five years. This invests in sectors like Financial services and FMCGs. The minimum investment is ₹5,000 and the minimum SIP amount is ₹500.  

2. ICICI Prudential Child Care Fund 

This is also an open-ended investment fund for children having a lock-in for at least 5 years or till the child attains the age of majority. 

The scheme has given 18.50% returns in five years. Chemicals, Capital goods, and Financial services are the fund's top sectoral holdings. The minimum investment is ₹5,000 and the minimum SIP amount is ₹100.  

3. ABSL Bal Bhavishya Yojna 

Similar to the other funds, this is also an open-ended investment fund for children with a lock-in for at least 5 years or till the child attains the age of majority. In five years, the scheme gave a return of 13.12 %. The  minimum investment amount is ₹1,000 and the minimum SIP amount is ₹500. 

Which To Choose?