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Home » NPS Vatsalya vs PPF: A Good Investment Showdown for Your Child’s Future

The Government of India recently launched the NPS Vatsalya scheme, which provides parents with a valuable way to secure their children’s financial future. The initiative allows their children below 18 years of age to open National Pension System (NPS) accounts, enabling them to contribute regularly and have a corpus for important milestones like education and marriage.

Understanding NPS Love
This is how it works

To get started, parents need to make an initial deposit of at least ₹1,000. There is no limit on future contributions, which gives parents the flexibility to save according to their financial situation. After the child turns 18, they have the option to withdraw the entire amount or continue investing till the age of 60.

Potential income

The major benefit of NPS affection is the high earning potential. By diversifying investments between equity and debt funds, parents can target substantial growth over time. For example, if you invest ₹10,000 every year for 18 years and want an expected 10% annual return, the corpus could exceed ₹2.75 crore by the time the child turns 60.

Indian Rupee Money
Indian Rupee Money

Public Provident Fund (PPF)

Public Provident Fund (PPF) is another preferred savings option, especially for long-term goals. It offers a fixed interest rate, currently at 7.1% per annum, which ensures stable and predictable returns.

How does PPF work?

To open a PPF account, a minimum initial deposit of ₹500 is required. You can contribute up to ₹1.5 lakh annually and the account matures after 15 years, with an option to extend it in blocks of five years.

Potential income

If you invest ₹1.5 lakh every year for 25 consecutive years at 7.1% interest rate, you can accumulate more than ₹1 crore.

Which option is right for you? Choosing between NPS endowment and PPF depends on your financial goals, risk tolerance and investment horizon. If you want high potential returns and are comfortable with few market fluctuations, NPS equity is a good choice. However, if you want fixed investments with guaranteed returns, PPF is a reliable option.

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