If you don’t want to worry about your child’s future then plan ahead and assist them financially. In today’s era, the only way to help a person is to assist them in improving their financial conditions. And the right path to walk towards is to invest in a Government backed savings scheme which will ultimately help your family in need. Out of all the major investment schemes that the Government offers, the most beneficial is PPF or Public Provident Fund. But the efforts will only be fruitful when you don’t give up on consistency.
Public Provident Fund or PPF: Securing Your Child’s Future
“As per paragraph 3 of the Public Provident Fund Scheme, 2019, any parent or legal guardian can open a Public Provident Fund account in the name of a minor child. Please note that not more than PPF one account can be opened in the name of a person. Under the PPF scheme, 2019 there is no restriction on any of the parents or both parents contributing to the PPF account of a minor child,” said Balwant Jain, Tax Expert.
Benefits of PPF Account for Your Child
1. Contribution Period
The PPF account offers a significant advantage with its lock-in period of 15 years. Additionally, when the child reaches the age of 18, they have the option to either close the account or extend its duration.
“Your child can choose whether to shut the PPF account or keep it open once they turn 18 and the account has served its required lock-in period of 15 years. Children who open PPF accounts when still young can avoid lock-in in the future,” said Vinit Khandare, CEO, MyFundBazaar.
Due to its extended lock-in period of 15 years, the PPF is considered a reliable investment choice. However, this extended duration can create liquidity concerns. On the positive side, this drawback is significantly reduced or eliminated for young investors.
2. Taxation Benefits
A family has the option to open multiple PPF accounts, with each member being eligible for an account. However, each individual is allowed to hold only one PPF account either in a Post Office or a Bank. Moreover, there is a maximum limit of ₹1.5 lahks for the total investment or deposit that an individual can make in a financial year.
3. Power of Compounding
If you are seeking a low-risk financial instrument for investment, the Public Provident Fund (PPF) backed by the government is an ideal choice.
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4. PPF Interest Rates
As children reach adulthood, it’s important to note that the interest rate on PPF may not remain at 7%. In the past, this scheme had offered a higher rate of 12%. Therefore, by the time your child grows up, they will have accumulated a corpus amount with the EEE (Exempt-Exempt-Exempt) status. PPF is a type of investment vehicle that falls under this EEE category, said Pankaj Mathpal, CEO, of Optima Money Managers, as quoted by Livemint.
