- Date : 01/07/2022
- Read: 3 mins
Leave a huge fund for your child by Investing in PPF
Building a corpus for your child is the need for today. Apart for education, there will be moments in his/her life when you'll have to sponsor him monetarily. If you begin saving and investing early on, you can provide your children with all the comfort and better opportunities. Today inflation is breaking records every quarter, and thus it has become utmost essential to save and invest money where it grows continually. You don't have to manage it actively.
There are many schemes that provide such passive investing and growth options, but none of them are as better as provident funds. Employee provident funds and public provident funds are one of the best sources of generating wealth for the long term for middle-class and salaried families.
Today, we will show you how you can build a huge fund and a bright future for your child with PPF. While EPF is partly contributed by the company and partly by the employee and is available for working people only, it leaves out cover for dependents. To cover dependents, there is a public provident fund where anyone can invest and save money for extended periods.
Let’s get to know more about PPF accounts.
What is a Public Provident Fund Account?
PPF accounts are a type of investment and savings scheme launched by the government of India in 1968. Here you can save money in an account by contributing a certain amount to it regularly, while the money grows with interest.
PPF accounts need to be locked for 15 years, and you cannot withdraw money without emergencies in between. So, if you open an account for your child at an early age, he might enjoy the benefits while he graduates or turns 18.
How Much Money Can Be Deposited?
As a parent, you can deposit a minimum of Rs 100 and a maximum of Rs 1,50,000 every year in your child's PPF account. A person can open and invest in only one PPF account, so if you already have one, you might have to close it and open a new one or add your children to that account to let them enjoy the benefits.
When Does PPF Account Mature?
A PPF account matures at 15 years from the account opening date, and you can choose to extend or withdraw the entire amount. If you decide to extend the tenure, you can do it in segments of five years.
Moreover, if there are emergencies before the fifteenth year, you can take a loan from your PPF account or choose to withdraw partially. In any such case, the maturity amount will be affected.
Coming to the main point of generating huge funds, this scheme provides an interest rate of 7.1% annually. As you lock in the amount for 15 years, the returns are going to be astonishing by the compound interest.
To give a perspective, if you invest Rs 1.5 lakhs every year in this account and keep doing it for 15 years, you can have a corpus of Rs 40,20,301where your initial investment is just Rs 22,50,000. This scheme can do wonders if you max it out every year, and your child will have a huge fund to live with whenever you decide to hand it over. PPF investments also provide tax deduction of upto Rs 1.5 lakhs under Section 80C. Also the maturity amount (including interest) is exempt from tax.
So open this account today, and take a step towards a brighter future for your children.