Last Updated:
Investing early for a child’s future is crucial. SIPs in mutual funds can yield higher returns but are market-dependent, while SSY offers secure, tax-free savings.
SIP vs SSY: Which is better option to secure your child’s future?
SIP vs SSY Calculator: Securing a child’s future is one of the most important responsibilities for every parent. With the rising cost of education, it becomes essential to start investing early for the child’s needs. Parents generally seek investment options that offer returns higher than the rate of inflation until the funds are required.
Mutual funds and Sukanya Samriddhi Yojana (SSY) are two options that allow parents to invest regularly for their child’s future. However, many investors face the dilemma of deciding where to invest their hard-earned money.
Let’s compare these two investment avenues for investors with an example.
Sukanaya Smariddhi Yojana (SSY) is a government-backed small savings scheme that allows investors to invest monthly from a low of Rs 250 and subsequent. There’s no investment ceiling, but the total yearly investment must not cross over Rs 1.5 lakh.
Interest is calculated monthly based on the lowest balance in the account between the close of the fifth day and the end of the month. The current interest rate for SSY is 8.1%.
While Systematic Investment Plan (SIP) allows investors to invest in chosen mutual funds each month to create a corpus of wealth.
While SSY is a secure, tax-free savings option, SIP in equity mutual funds offers higher but market-dependent returns. The returns in SIP is dependent on markets.
Let’s check the estimated returns if you invest Rs 12,000 per month for 20 years. How much corpus of money you will build for it?
Investment Growth Over 20 Years (₹12,000 per year)
Scenario 1: SIP in Mutual Funds (Assumed 12% CAGR)
Investment: ₹12,000 per year (₹1,000 per month SIP)
Expected Return: 12% per year
Duration: 20 years
Final corpus after 20 years: ₹9.68 lakh
Scenario 2: Sukanya Samriddhi Yojana (SSY) – 8.2% Interest (Estimated)
Investment: ₹12,000 per year
Expected Return: 8.2% per year (fixed)
Duration: 20 years
Final corpus after 20 years: ₹6.07 lakh
| Investment Option | Annual Investment | Assumed Annual Return | Maturity Amount After 20 Years |
|---|---|---|---|
| SIP in Mutual Funds | ₹12,000 | 12% | ₹9.68 lakh |
| Sukanya Samriddhi Yojana (SSY) | ₹12,000 | 8.2% | ₹6.07 lakh |
So, SIP benefits from higher compounding returns, while SSY is safer and tax-free. For wealth creation, SIP is preferable; for guaranteed savings, SSY is better.