Choosing between Mutual Funds vs. SSY for a Girl Child’s Future
Deciding on an investment plan for a girl child is one of the most important decisions for parents. The main objective of an investment plan is to enable you to increase your wealth over time & let you achieve long-term financial goals, like retirement planning, buying a house, a child’s higher education, etc. To secure the financial future of your daughters, there are many investment options which may best suit you.
Every parent tries hard to offer the best opportunities in all areas of life for their children. Choosing the Best Investment Plan for a Girl Child is one of the most important decisions to be made by the parents. Amongst many different investment plans available, we will be discussing the Sukanya Samriddhi Yojana (SSY) & Mutual Funds in this article. Both the plans play an important role in helping parents to lay a foundation for investments, but which one is better, i.e. mutual fund’s growth potential or SSY’s stability, is the decision to be made wisely. The decision of the parents to choose an investment plan will depend on the future financial objectives, investment horizon, & risk tolerance level, etc. We will discuss in detail the differences between the two plans in this article. Let us go ahead:
What are Mutual Funds?
Mutual Funds is an Investment Plan, where funds are collected from multiple investors & invested in a diversified portfolio of assets. The investors are supposed to share the profits & losses of the whole fund equally. Parents looking for savings for their daughter’s education & marriage purposes can invest in the mutual funds. These investments in mutual funds are regulated under the Securities & Exchange Board of India, which allows parents or guardians to open an account in the name of a minor, whether a boy or a girl. The legal guardian has to manage the funds until the minor child attains majority, hence securing their financial future.
What is the Sukanya Samriddhi Scheme?
Sukanya Samriddhi Yojana (SSY) is a secured savings plan backed by the government of India, which is designed to secure the financial future of a girl child. It was launched in 2015 under a government scheme called “Beti Bachao, Beti Padhao for a girl child’s welfare. This scheme is considered to be an ideal plan for the parents of a girl child as it aims to offer financial security to them, hence helping to meet their girl child’s education expenses, marriage expenses or any other future needs.
Difference between Mutual Funds & SSY
| Point of Difference | Mutual Funds | SSY |
| Account management | This account is operated by either the parents or legal guardians. | This account will be managed by the parents or legal guardian of the girl child until she turns 18, after which she herself will manage it. |
| Returns | Returns are not fixed as dependent on the market. | Returns here are fixed, generally at 8%. |
| Number of accounts | There is no restriction on to opening of a number of accounts | The maximum number of accounts that can be opened is two, with a family of two daughters |
| Risk | It is a risky investment being linked to the market | It is a risk-free plan being backed by the government of India. |
| Age Limit | The maximum age to open a CMF account is 18 years. | The maximum age to open an SSY account is 10 years. |
| Lock-in period | The lock-in period lasts until the child attains majority. | The lock-in period is 21 years from the date of opening of the account. |
| Investment limit | There is no limit. | The investment limit is INR 1.5 lakhs per annum. |
| Premature withdrawal | It allows premature withdrawal of funds once a lock-in period of 3 years has been completed. | It is allowed once throughout its tenure after the girl child attains the age of 18 years. |
| Nomination | Available | Unavailable |
| Insurance | Insurance is available | Not available |
| Maintenance cost | Under this plan, an expense ratio is charged on an annual basis. | No maintenance cost |
Features & Benefits of Mutual Funds
Provided are the features & benefits of Mutual Funds:
- It involves parents or legal guardians investing in the plan.
- This plan is not restricted to the girl child only.
- The funds raised from the plan can be utilised to bear the child’s education or marriage expenses.
- It involves a lock-in period of 21 years from the date of opening of the account.
- It is advised to opt for equity-oriented or balanced funds to achieve higher returns.
- It is advised to opt for debt funds to achieve moderate returns & higher stability.
Features & Benefits of SSY
Provided are the features & benefits of Mutual Funds:
- This account has to be operated by the parents or legal guardian of a girl child below 10 years of age.
- The power to maintain the account will be transferred to the girl child once she attains maturity, i.e. she turns 18 years.
- All the benefits associated with this account get transferred to the girl m&atorily.
- Only one account is allowed to be opened for a girl child.
- Two SSY accounts are allowed to be opened per family.
- In certain special cases, such as when one account is already opened & in the case of a second account, there are twins, then it is allowed to be opened for the 3rd child as well.
- The policy tenure is 15 years.
- The amount to be invested will range between INR 250 to 1.5 lakhs per year.
- The applicable interest rate is 8% per annum.
- It allows an exemption of tax on the amount of capital invested, interest earned, & maturity amount.
Conclusion
Where Sukanya Samriddhi Yojana offers competitive interest rates along with tax benefits, allowing one to meet education, marriage, or any other future obligations. On the contrary, mutual funds are meant for those who want to create long-term wealth with the help of regular & disciplined investing. They let investors enjoy compounding benefits, letting them achieve long-term financial objectives. The choice between the two plans depends on the risk acceptance level, investment horizon, & financial objectives.
