Opening Fixed Deposits (FD) for your children is a smart way to secure their future. They can access the accumulated amount and utilise it without any restriction once they reach the age of 18 years.
This way, you can easily finance their higher education and wedding expenses or help them purchase their first home when they grow up. Click here to explore various FD options from leading financial institutions and make a smart choice.
Key Features of Fixed Deposits for Children
Here are some important aspects of a fixed deposit for children that you must know:
Tailored for Minors
These fixed deposit schemes are specially designed for children under the age of 18 years. As a parent or guardian, you need to oversee the account until the child reaches maturity age. These FDs provide a secure, risk-free investment option to establish a financial foundation for your child’s future.
Flexible Deposit Amounts
You have the flexibility to choose based on your financial capacity and your child’s future needs. It can be as low as ₹1,000, with no upper cap. You can even use the FD calculator to determine the ideal investment amount and invest accordingly.
Competitive Interest Rates
FDs come with competitive interest rates, which helps ensure steady growth over the chosen period. Some banks or financial institutions offer slightly higher rates than regular deposits to promote long-term savings for children. Note that these rates may vary depending on various factors like:
- Duration of the deposit
- Prevailing market conditions
Numerous Investment Options
Fixed deposits for minors come with a wide range of investment durations, spanning from 1 year to 15 years. This flexibility ensures that the deposit matures at the appropriate time to meet the intended financial requirements of your child.
Premature Withdrawal
These fixed deposits often allow you to liquidate the amount before the end of the tenor, subject to some terms and conditions. Remember that early withdrawals may come with a premature withdrawal charge. However, this feature can be beneficial in the case of unforeseen circumstances or urgent financial needs.
Single or Joint Holders
When considering a fixed deposit for children, you can choose to have single ownership or add your child as a joint holder. This helps you have proper control over the funds until your child reaches 18 years.
Benefits of Opening Fixed Deposits for Children
FDs for children benefit you and your child in more ways than one. From accumulating substantial wealth to enjoying tax benefits, here are some of these perks:
- An FD for children aims to provide financial security for the child’s future needs, such as higher studies, wedding, purchasing a home or other significant requirements
- It helps children understand the importance of savings and financial discipline from a young age, contributing to the development of responsible habits
- Fixed interest rates ensure assured growth of the investment, protecting it from market volatility
- Some FDs offer tax benefits under Section 80C of the Income Tax Act, providing additional benefits for you
- Many FD schemes allow you to make periodic contributions to the FD, offering a way to enhance savings as per your finances
Eligibility Criteria and Documentation
FD issuers set some eligibility and document requirements to verify your investment. These vary depending on the issuer you choose, so understand them before investing for a seamless experience.
The following are some common criteria for opening a fixed deposit for children:
- 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
You also need to submit these documents while opening an FD:
- Proof of the date of birth of the child
- PAN card of the parent or guardian
- Aadhaar card/voter ID/ passport /driving licence of the parent or guardian
- Proof of address of the parent or guardian
Steps to Invest in a Fixed Deposit for Children
The application process varies depending on the issuer you choose, but here is a general overview of what you need to do:
- Visit the website or branch of your preferred issuer
- Go to the FD section on the website or talk to a representative if you are visiting the branch
- Provide identity verification for both yourself and the child
- Submit other required documents along with passport-size photographs
- Transfer the deposit amount, and the institution will open the account post-verification
A substantial corpus can significantly help your child attain your goals and needs easily. However, investing is an essential decision that demands due diligence and caution. Compare your options and take a look at all the essential terms and conditions before you invest. Click here to easily compare and invest online with minimal formalities.
