Q: Hi, Adhil. I recently became a dad to a beautiful girl child, and I’m planning to start an investment for her future requirements. I’m confused between Sukanya Samriddhi Yojana (SSY) and the Public Provident Fund (PPF). Which one, according to you, is the better option? – Jacob Rodriguez.
Ans: Hello Jacob. Firstly, heartiest congratulations to you and your wife! Both SSY and PPF are excellent investment tools to secure your girl child’s future. SSY is currently offering 7.6% p.a. while PPF 7.1%, which are higher than a majority of long-term FD offers as per latest trends. Plus, both the tools come with a sovereign guarantee (hence they are extremely safe) and offer best-in-class tax-efficiency because of their E-E-E status. Here are a few pointers to help you decide between the two.
Purpose of investment: The funds in an SSY account belong to your daughter even if you make the contributions. So, if the purpose of your investment is to build a common fund for your daughter and any other financial goal like your retirement savings, you might want to choose PPF over SSY. If it’s only for your daughter’s future requirements, SSY could be considered.
Investment amount: If you already have a PPF account and you want to open another PPF in your daughter’s name, remember your total investment in both the PPF accounts should not exceed Rs. 1.5 lakh in a financial year. You can invest anywhere up to Rs. 1.5 lakh in a financial year in SSY.
Investment flexibility: PPF has a lock-in period of 15 years, and the account can be extended in blocks of 5 years indefinitely. 50% of the available PPF balance can be withdrawn after 5 years of account opening, and the account can be prematurely closed to withdraw the entire balance after 5 years of account opening to meet pre-defined requirements like medical emergencies or to fund self or children’s education. SSY, one the other hand, has a lock-in period of 21 years and 50% of the corpus can be withdrawn for your daughter’s higher education or marriage after she attains the age of 18 years. The SSY account can be prematurely closed on your daughter’s wedding after she turns 18, or if she becomes a non-resident or citizen of some other country, or in the unfortunate event of her falling critically ill or her death or the death of her guardians, after fulfilling specific requirements. Considering these factors, it might not be wrong to argue that PPF is more flexible than SSY despite offering slightly lower returns.
In conclusion, both PPF and SSY can offer excellent returns to meet your daughter’s future requirements. Depending on your age, income, risk appetite, financial goals and liquidity requirements, you may also want to include other investments to diversify your portfolio. For example, top-rated equity mutual fund SIPs can generate higher returns than small saving schemes in the long-term albeit with moderate to high investment risk.
Source: sea.operanewsapp.com
