Your Child's Bright Future: Sukanya Samriddhi vs ELSS - A Parent's Dilemma

So, how do you navigate the financial landscape to secure your child's educational future?

Becoming a parent is a life-altering event, a celebration that not only brings joy but also ushers in a wave of responsibilities. The moment your little one arrives, their well-being becomes your top priority. Ensuring a stellar education for them is part and parcel of giving them the best possible start in life. So, how do you navigate the financial landscape to secure your child's educational future?

Early Savings: The Key to a Bright Tomorrow

Picture this: your child is born, and with it comes the realization that you're now responsible not just for their immediate needs, but also for securing their future. Early savings become crucial, especially when it comes to creating a financial corpus for their education. The challenge, however, lies in choosing the right investment option that accounts for the relentless march of inflation over the years.

ELSS vs SSY: Decoding the Investment Dilemma

The debate between Equity Linked Savings Scheme (ELSS) and Sukanya Samriddhi Yojana (SSY) has gained momentum in recent times. Both come with distinct goals. ELSS, a tax-saving mutual fund, can save you up to Rs. 1.5 lakh under Section 80C. On the other hand, SSY is exclusively designed for the benefit of girls' education or marriage, with a lump sum payment after the lock-in period i.e. 21 years.

Recent government moves have intensified the debate, especially after the interest rate in SSY was hiked to 8.2 per cent, bringing it in line with some of the highest interest rate Post Office schemes.

Nitty-Gritty of Investment Options: A Closer Look

Sukanya Samriddhi Yojna (SSY):

- Deposit: Rs 250 to Rs 1.5 lakh annually.

- Lock-in Period: 21 years.

- Claim deduction: Up to Rs. 1.5 lakh under Section 80C.

- Goal: Focused on girl education and marriage.

- Age Criteria: Girl child aged upto 10-years

Equity Linked Savings Scheme (ELSS):

- Claim deduction: Up to Rs. 1.5 lakh under Section 80C.

- Long-term capital gains tax: 10 per cent if capital gain exceeds Rs 1 lakh.

The Numbers Game: ELSS vs SSY

Let's crunch some numbers. If you deposit Rs 5,000 a month in SSY for 15 years at 8.2 per cent interest, you'll get Rs 27.92 lakh. In contrast, an ELSS investment of Rs 5,000/month for 15 years, with an average return of 19.75 per cent, can yield Rs 52.11 lakh. Even with a conservative estimate of 14 per cent, ELSS stands at Rs 30.64 lakhs. The figures speak volumes about the potential of ELSS for long-term returns.

Timing Matters: SSY for the Patient, ELSS for the Risk-Taker

SSY spans 21 years, which might be too late for your child's education if you start when they are aged 8 years. However, if you begin early at 1-2 years, the maturity at age 22-23 could prove timely. On the flip side, ELSS offers a three-year lock-in period, making it a more flexible option. With market-linked funds, ELSS carries higher risk but historically delivers better returns, making it a choice for the risk-taker.

Conclusion: Deciding the Path to Your Child's Future

In the end, the decision between ELSS and SSY hinges on your financial goals, risk appetite, and the age at which you start planning. While SSY provides a secure and focused approach, ELSS offers potentially higher returns with added risk. Consider your child's age, your financial aspirations, and the future you envision for them. After all, securing their educational journey is not just an investment – it's a gift that lasts a lifetime.