The public provident fund (PPF) is a top choice when it comes to long-term financial planning. Launched by the Centre in 1986, it is a reliable, low-risk government backed savings scheme with consistent and guaranteed returns and can be used to meet financial goals such as funding of wedding, children’s education abroad, buying a house, retirement fund or even building wealth.
A can be easily opened at any post office or bank branch across India by submitting an application form, photo and mandated KYC documents. For minors, the parent / legal guardian can open an account, which must be converted to major status once the primary account holder turns 18 years of age.
Parents can consider the instrument as a builder for their child over the long-term future. Here’s a look at how much wealth consistent PPF investment of ₹5,000 per month will build for your child.
PPF: How much ₹5000/month generates for your child?
Notably, the age you begin investing at has a large impact on the total corpus accumulated at time of withdrawal (usually at retirement i.e. 60 years of age). PPF is offering interest rate of 7.1% at present.
- If you start their investment at age 10: ₹5,000 per month deposited for 50 years is investment of ₹30 lakh and earns you interest of more than ₹2.40 crore, for total maturity payout of over ₹2.70 crore at age 60.
- If you start their investment at age 11: ₹5,000 per month deposited for 49 years is investment of ₹29.40 lakh and earns you interest of more than ₹2.22 crore, for total maturity of more than ₹2.51 crore at age 60.
- If you start their at age 12: ₹5,000 per month deposited for 48 years is investment of ₹28.80 lakh and earns you interest of more than ₹2.05 crore, for total maturity payout of more than ₹2.34 crore at age 60.
- If you start their investment at age 13: ₹5,000 per month deposited for 47 years is investment of ₹28.20 lakh and earns you interest of more than ₹1.90 crore, for total maturity payout of more than ₹2.18 crore at age 60.
- If you start their investment at age 14: ₹5,000 per month deposited for 46 years is investment of ₹27.60 lakh and earns you of more than ₹1.75 crore, for total maturity payout of more than ₹2.03 crore at age 60.
- If you start their investment at age 15: ₹5,000 per month deposited for 45 years is investment of ₹27 lakh and earns you interest of more than ₹1.62 crore, for total maturity payout of more than ₹1.89 crore at age 60.
- If you start their investment at age 16: ₹5,000 per month deposited for 44 years is investment of ₹26.40 lakh and earns you interest of more than ₹1.49 crore, for total payout of more than ₹1.76 crore at age 60.
- If you start their investment at age 17: ₹5,000 per month deposited for 43 years is investment of ₹25.80 lakh and earns you interest of more than ₹1.37 crore, for total maturity payout of more than ₹1.63 crore at age 60.
- If you start their investment at age 18: ₹5,000 per month deposited for 42 years is of ₹25.20 lakh and earns you interest of more than ₹1.27 crore, for total maturity payout of more than ₹1.52 crore at age 60.
Power of compounding: Set your child up for success
As seen with the above calculations, delaying investment by just a few years can have significant impact on your final corpus — a difference of eight years could mean loss of over ₹1.25 crore in the final value! Thus, to set your children up for success, a key factor is to start early and remain invested for extended period in order to make the most of your investment.