A major financial goal for most parents today is to save or invest for their child’s future. The Indian government, along with financial institutions, therefore, bring various schemes to help grow their savings effectively. Sukanya Samriddhi Yojana is one such government-led initiative, inspiring parents to educate and encourage their daughters. They can open a savings account in their girl child’s name under SSY and gain from attractive Sukanya Samriddhi Yojana interest rate.
Another investment option with high returns is a fixed deposit. Financial institutions, including NBFCs, offer FDs with several benefits and more flexibility. If you plan to make an investment for your daughter, ensure to check out some important facts first.
Sukanya Samriddhi Yojana vs. fixed deposit
1.Interest rates
A significant point of difference is the interest rate. The government revises the interest rate of SSY in every quarter. Currently, the rate in Q2, FY 2019-20 is around 8.4%, bringing good returns on the investment.
One of the reasons to invest in FDs, interest rates remain unchanged throughout the pre-determined lock-in period. It is also comparatively higher with guaranteed returns and no influence from the market. For example, the Bajaj Finance FD interest rates are of 8.10%, which can increase up to 8.35%. It helps you amass enough wealth, growing your corpus as well.
2.Flexible tenors
An account under the SSY scheme has a lock-in period of 21 years, starting from the date of opening the account. If required for marriage or education, you can make a premature withdrawal of up to 50% only when the girl turns 18 years.
A fixed deposit comes with a flexible tenor from 12 to 60 months. Customers can choose a suitable lock-in period as per their need and interest income. This flexibility shall allow you to address your liquidity needs strategically.
Note that you can use an FD calculator online to check your maturity amount, interest payouts, etc. based on tenor and interest rate. Ensure to have more clarity before investing in either scheme.
3.Funds at the time of emergency
During cash needs, SSY allows you to withdraw only up to 50% of the investment prematurely after your girl turns 18. So, if you start investing when she is, say, 9 years, it may not create enough wealth for the financial requirements.
On the contrary, fixed deposits come with a lock-in period, liquidating within which shall incur a premature withdrawal charge. An alternative is to avail a loan against FD at nominal rates. It not only gives you access to a lump sum amount but also generates returns for the investment. As the Bajaj Finance FD interest rates are higher, you can make the loan repayment easier with this additional income. Make sure to know how a loan against FD works before availing.
SSY does not offer this option of availing a loan.
4.Facility of multiple deposits
In Sukanya Samriddhi Yojana, only one account is permitted to open in one girl child’s name. A maximum of two daughters of the parents can hold two accounts under this scheme. 3rd and 4th daughters (if any) shall not be eligible for this benefit.
However, there is no such limitation in an FD. One individual can hold multiple FD accounts in his/her name and with varying investment amounts. He/she can also select separate tenors for each deposit as per financial plans. Here, an additional benefit is that you can liquidate any one account during emergencies while the rest remain unharmed. Such features make an FD account your ticket to financial independence.
5.Online application process
Nowadays, financial organisations made the account opening process for FDs simpler and hassle-free. As an investor, you can easily apply through an online application form and save the trouble of lengthy documentation.
No option is available to invest in Sukanya Yojana online. You need to visit a branch nearby to complete the application and documentation process, making it a bit troublesome.
Besides FD and Sukanya Samriddhi Yojana interest rate and other benefits, making the right choice largely depends on your financial plans. SSY is ideal if you plan to utilise the invested amount later for wedding or education. Fixed deposits are better for short-term financial goals, offering higher and assured returns.
