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Business News/ Money / Sukanya Samriddhi account: Top 6 reasons why you should not invest in it for your daughter
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Sukanya Samriddhi account: Top 6 reasons why you should not invest in it for your daughter

Sukanya Samriddhi account: Simply opening a SSY account may not be sufficient for securing your daughter's future due to several reasons

Sukanya Samriddhi Yojana (SSY) currently offers an interest rate of 8 per cent. (iStock)Premium
Sukanya Samriddhi Yojana (SSY) currently offers an interest rate of 8 per cent. (iStock)

The Sukanya Samriddhi account is a popular savings instrument in India for parents with daughters as it offers government-guaranteed, tax-free returns. However, simply opening a Sukanya Samriddhi Yojana (SSY) account may not be sufficient for securing your daughter's future due to several reasons. 

Top 6 reasons not to invest in Sukanya Samriddhi Yojana

1)Sukanya Samriddhi account interest rate

Sukanya Samriddhi Yojana (SSY) currently offers an interest rate of 8 per cent. However, this SSY interest rate is changeable on a quarterly basis. This may not be enough to combat the high inflation associated with goals like education and marriage expenses, said Amit Gupta, MD, SAG Infotech. 

The Sukanya Samriddhi Yojana is an extensive investing strategy. So, it doesn't provide a return that beats inflation when compared to mutual funds, said Vinit Khandare, CEO & Founder, MyFundBazaar.

Also Read: Why you should not invest in PPF

2) Sukanya Samriddhi account long tenure

Considering the long tenure of the SSY (21 years), it becomes clear that the best way to generate inflation-beating returns in the long term is through equity investments. Amit Gupta said that for goals that are more than 10 years away, it is advisable to allocate more funds to equity funds rather than relying solely on debt investments, unless you are a highly conservative saver.

3) Sukanya Samriddhi account: Less investor-friendly

The SSY account has certain restrictions that make it less investor-friendly. The funds saved in the account can only be used for education and marriage expenses. Additionally, the entire corpus remains.

Also Read | Disadvantages of fixed deposit: Nine reasons not to invest in bank FDs

4) Sukanya Samriddhi account Lock-in period

Sukanya Samriddhi Yojana has a long lock-in period. The maturity period of SSY is 21 years from the account opening. The funds are locked in until the girl reaches the age of 18, with only 50% available for higher education. 

5) Sukanya Samriddhi account: Deposits can only be made for the first 15 years

Another peculiar rule is that deposits can only be made for the first 15 years, despite the account's 21-year tenure.

6) Sukanya Samriddhi account withdrawal and maturity rules

After a girl reaches 18 years of age, guardians can withdraw money from the account up to 50% of the balance in a financial year. According to the regulations set by the Department of Posts, withdrawals can be accomplished in a single transaction or in installments, with a maximum of one withdrawal per year with up to a limit of 5 years.

Also Read | Senior Citizen Savings Scheme: 5 disadvantages of investing in SCSS—interest rate to fixed tenure

As per Gupta, to address these limitations, it is recommended to have a mix of equity and Sukanya investments. 

He further said that the allocation can vary based on risk appetite, with aggressive investors allocating 70-80% to equity and 20-30% to Sukanya, balanced investors allocating 50-60% to equity and 40-50% to Sukanya, and conservative investors allocating around 30% to equity and 70% to Sukanya

“SIP is a wise option for higher returns. Additionally, investing in stocks for the long run makes sense," said Vinit Khandare.

However, there is no doubt that SSY is the finest investing scheme for girls. It's a savings strategy designed specifically for Indian female youngsters. Deposits can be made on a monthly or yearly basis. According to the Sukanya Samriddhi Account (Amendment) Rules, 2018, the minimum amount to open an SSY account is 250. The maximum you can invest in a year is 1.5 lakh.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

 

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ABOUT THE AUTHOR
Sangeeta Ojha
A business media enthusiast. Writes on personal finance, business and banking.
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Updated: 24 May 2023, 12:48 PM IST
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