PPF for child: Deposit Rs 5000 per month, adds up to Rs 16 lakh in 15 years

PPF for child:Arranging money for good education of children or their secure future is the biggest priority of every parent. Unlike stock market related options, government backed PPF is still considered the safest option to earn money in the long run. Even small savings can turn into big funds in the future if you start at the right time.

A parent or legal guardian can easily open a PPF account in the name of their child. However, one important rule needs to be kept in mind. The annual deposit in your child’s account along with your own PPF account is Rs. 1.5 lakh should not exceed the limit.

How to make a fund of 16 lakh rupees by saving 5000 rupees?

If you save Rs 5,000 per month for your child’s future, this amount becomes Rs 60,000 in a year. The total investment period of this scheme is 15 years. According to this, a total principal amount of Rs 9 lakh will be deposited in your pocket in 15 years.

Currently, the scheme offers interest at 7.1 percent compounded annually. After the completion of 15 years, this investment will increase to approximately 16.3 lakh rupees. The special thing is that an amount of more than 7 lakh rupees will be generated only from interest.

Money grows with the power of compounding

One of the biggest benefits of starting savings at an early age is the compound interest. When you start investing when your child is young, interest starts compounding every year. Because of this, even your small contribution turns into a big fund in the long run.

As per the rules, it is not necessary to close the child’s PPF account after completion of 15 years. If you don’t need the money immediately at that time, you can extend this account in blocks of 5 years with new investments.

Tax exemptions are available at every level of investment

The biggest feature of PPF investment is that it offers tax-free benefits at every stage of investment. Deduction is available on deposited amount under Section 80C of Income Tax. Apart from this, interest accrued every year also does not come under the ambit of tax. The entire amount received on maturity is also completely tax free.

Know its drawbacks before investing money

Despite full protection and guaranteed returns, PPF is not suitable for every small need. The scheme has a strict lock-in period of 15 years. In addition, there are very strict conditions for withdrawing money in between. In such a situation, parents who will need the money in the next 3 to 4 years should look for other flexible options instead of this plan.