If you intend to invest ₹1.2 lakh a year for 15 years, among others, two options are very popular —Systematic Investment Plan (SIP) and Sukanya Samriddhi Yojana (SSY). Both contribute to a future capital but do so in very different ways. Whereas SIPs are linked to the market and offer potentially higher returns, SSY is a government-backed saving scheme for a girl child’s future.
What is SIP and how does it work?
With SIP, you can invest a set amount in a mutual fund at regular intervals (monthly, quarterly, etc.). Here, investing ₹10,000 a month totals to ₹1.2 lakh a year, or ₹18 lakh over 15 years. Assuming an annual return of 12% (which is normal for equity mutual funds), your total maturity could reach approximately ₹47.6 lakh. That’s made up of ₹29.6 lakh in projected returns alone.
SIP works well because it uses compounding and rupee-cost averaging to grow your money steadily. To even out market fluctuations, you buy more units when the price is low and fewer when the price is high. It is best suited for long-term goals like your son’s or daughter’s college education, wedding, or retirement.
Sukanya Samriddhi Yojana (A Secure Savings Scheme)
SSY is an investment for parents of girl children below the age of 10. It gives 8.2% interest rate per annum ( as on Jan 2024 ), compounded annually with full tax-free. You can invest maximum ₹1.5 lakh in a year and the maturity period is 21 years from the opening of the account. Only deposits for the first 15 years are permitted.
If you invest ₹1.2 lakh each year in SSY for 15 years, your total investment to the can be made also be ₹18 lakh. At maturity, you’ll receive about ₹55.4 lakh—more than SIP—thanks to the fixed and compounding nature of SSY interest.
Liquidity and Lock-in: One Crucial Difference
SIP offers flexibility. You can withdraw your money any time without penalty, so it’s a good option for emergencies. SSY however has rigid rules of withdrawal. Partial withdrawal (maximum of 50%) is available on attaining 18 years of the child and full maturity by 21 years.
Final Verdict: Which Should You Choose?
If you are looking for higher returns with added convenience and are comfortable with market volatility, SIP is the way to go. But if what you want is a secure, tax-free way of savings for your daughter’s future, SSY is the safer pick. Your selection is based on your risk tolerance and financial objectives.