Sukanya Samriddhi Yojana Vs child plans offered by MFs

The market is flooded with various products and schemes revolving around one theme that is 'child'. This is because companies are smart enough to target emotions and when it comes to their children people may even fall prey to high returns promised by ponzi schemes. However, there is one Government scheme named Sukanya Samriddhi Yojana which aims to help investors in saving for girl child’s education and marriage.
 
The government came up with this product to promote the welfare of girl child. A maximum number of accounts that you can have is two accounts for two girl child or three in case of twin girls as second birth or the first birth. The minimum amount of deposit accepted is Rs. 1,000 and the annual ceiling is of Rs. 1.5 lakhs in a financial year. The yojana also qualifies for tax deduction under 80C up to Rs. 1.5 lakhs. The lock-in period is 21 years and deposits are accepted up to 15 years from the date of opening of the account. Premature closure is only allowed in the event of the death of the depositor or in cases of extreme compassionate grounds such as medical support in life-threatening diseases to be authorized by an order by the Central Government. However, 50 per cent of the balance can be used for the purpose of higher education and marriage post the child attaining the age of 18 years. The rate of interest that is enjoyed by the scheme is 8.50 per cent w.e.f. Q3 of FY 2018-19.
 
Child plan schemes offered by MFs are completely different than Sukanya Samriddhi Yojana. As per the recent Securities and Exchange Board of India (SEBI) re-categorization, these schemes are categorized as solution-oriented MFs. Unlike the yojana which is limited to the girl child, child plans by MFs have no such restrictions. The lock-in period of these child plans is 5 years or child attaining major, whichever is earlier. Child plans from MFs don’t account for benefits under section 80C for tax deduction. Minimum investment required is Rs. 5,000, if invested in lumpsum. However, it is as low as Rs. 500 if invested via SIP (Systematic Investment Plan) route. The average 5-year returns provided by such plans is 15 per cent which is definitely much more than the Sukanya Samriddhi Yojana. But if we consider risk factors then child plans from MFs carry more risk than the yojana.
 
Now the question is which plan to choose, Sukanya Samriddhi Yojana or child plans from MFs. The structure of both the products are different as one invests in debt and money market investments with no exposure to equities and the other has no such restrictions so it may invest in equities, that too, across market-cap as well as in debt. So everything gets down to your risk-taking appetite. If you are really very conservative and cannot digest even a single rupee loss then go for  Sukanya Samriddhi Yojana. However, if your risk profile permits you to take moderate to aggressive risk, then you may opt for the MF child plan offers.