As a parent, you can invest in Fixed Deposits (FDs) for your children to secure their future financially. They are special savings plans for depositing a lump sum amount in your child’s name. These plans work like regular fixed deposits, offering assured returns and safety for the invested amount.
Bajaj Markets is a financial services marketplace where you can explore a wide range of fixed deposit options for your children. You can compare interest rates, maturity terms, minimum investment amount and other factors to make a well-informed decision and maximise your profits.
Understanding Fixed Deposits for Children
These instruments are specially tailored for children, where you, as a parent or guardian, can deposit a significant sum. It helps build a corpus for the child’s future financial needs.
Here are some key points to note:
- These instruments are specially tailored for children, typically under the age of 18 years
- The minor who holds the fixed deposit can withdraw the principal amount along with the earned interest after turning 18 years old
- You need to manage the account as a parent or guardian until the child reaches 18 years
- These schemes have a fixed investment duration, like regular FDs, and they generate earnings at a predetermined interest rate
Benefits of Investing in Fixed Deposits for Children
While security and guaranteed returns are a few advantages of FDs, there are a few additional benefits as well. Here are a few other pros you get to enjoy when you book an FD for your child:
Assured Growth of Investment
Like regular FDs, they come with fixed interest rates, ensuring reliable and predictable growth. So, you do not need to stress about your earnings being affected due to market fluctuations.
Competitive Interest Rates
Issuers offer special rates when you book FDs for your children. You can take advantage of this fact and maximise your returns, helping you to accumulate a sizeable sum for your child.
Flexible Investment Terms
Enjoy the flexibility to select the investment term similar to regular FDs. This allows you to align the investment duration with the child’s financial needs in the future, such as education, getting a house or paying for their wedding expenses.
Minimal Deposit Amount
Many banks and NBFCs require you to invest a small sum to start your FD. This enables you to begin your investment journey for the child without overburdening your finances.
Inculcates Financial Discipline in Your Child
By booking a fixed deposit for your child, you teach them the importance of investment early on. By assessing how these financial products work and why they are essential, they understand the habit of investing smartly from a young age.
Tax Benefits
Some fixed deposits for minors also qualify for tax benefits under Section 80C of the Income Tax Act. This offers an additional incentive for you to invest in these schemes and build a corpus for your child’s financial requirements.
Eligibility Criteria and Documents Required
Here are the criteria for opening an FD account in your child’s name:
- You can open an account if you are an Indian resident or a non-Indian resident (NRI)
- Hindu Undivided Families (HUFs), clubs and societies can also open an account
The minor needs to meet the following parameters to withdraw the funds:
- The minor must have attained 18 years of age
- The minor must have completed and passed the board examinations of Class X
- If the minor is a girl, she must have successfully completed her education for at least 2 years post her enrolment in class IX
Submit these documents when booking an FD for minors:
- PAN card of the parent or guardian
- Proof of the date of birth of the child
- Proof of address of the parent or guardian
- Aadhaar card/voter ID/ passport/driving Licence of the parent or guardian
Tips for Investing in Fixed Deposits for Children
Before booking an FD, compare and research various options to choose the best FD plan for your child. Consider these tips to help you make the right decision:
- Build a substantial corpus by starting the investment early, as you get to leverage the power of compounding
- Use the laddering strategy, which involves staggering the maturity dates of various FDs to benefit from varying interest rates over time
- Watch out for the maturity dates of your FDs and reinvest to maximise your earnings
- Understand the tax implications on your fixed deposit and plan your investment accordingly
- Set up an auto-renewal facility on your FDs to continue earning interest on your investment
- Choose cumulative FDs to get higher interest, as you earn the payout at maturity
As you can see, fixed deposits are a secure investment option to help your child financially once they reach the age of 18 years. You can invest in the perfect and best child fixed deposit plans in India online or offline at your convenience.
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