Investment – Choosing Between Guaranteed Savings and Market Growth for Daughters

Investment – When parents begin setting aside money for their daughter’s future, the decision often narrows down to two distinct paths: a government-backed savings plan that assures stability or equity investments that aim for higher returns over time. The comparison frequently centres on balancing financial security with growth potential.

Stability Through a Government-Backed Plan

The Sukanya Samriddhi Yojana has emerged as a preferred savings avenue for families seeking predictable outcomes. Backed by the government, the scheme currently offers an interest rate of around 8.2 percent, along with tax benefits under Section 80C of the Income Tax Act. Its appeal lies in its structured design and the certainty it provides to investors planning for long-term goals such as higher education or marriage expenses.

Chartered Accountant Meenal Goel highlights the scheme’s potential by sharing a practical example. According to her, an annual investment of Rs 1.5 lakh for 15 years at the prevailing interest rate can accumulate to nearly Rs 71 lakh by the time the child turns 21. The maturity amount, along with the interest earned, remains tax-free, making it an attractive proposition for conservative investors.

The scheme operates under the EEE framework, meaning the principal investment, the interest accrued, and the final maturity amount are all exempt from tax. Contributions made during the specified investment period also qualify for deductions under Section 80C, provided the scheme continues under the existing tax laws. For families prioritising clarity and guaranteed returns, this structure offers reassurance.

Market-Linked Investments and Growth Potential

Equity investments, including equity mutual funds, present a different financial journey. Unlike fixed-income schemes, market-linked products do not promise assured returns. Instead, they offer the possibility of higher gains over extended periods, driven by market performance and economic growth.

Historically, equity mutual funds have delivered stronger long-term returns compared to most traditional savings instruments. However, this growth comes with volatility. Market cycles can bring significant fluctuations, testing an investor’s patience and risk tolerance.

Returns from equities are subject to long-term capital gains tax, which reduces the final take-home amount. Even so, disciplined investors who remain invested across market ups and downs often see their portfolios grow substantially over time. The potential for wealth creation is higher, but so is the exposure to market risk.

Weighing Certainty Against Volatility

Financial planners often stress that the debate is less about identifying a superior option and more about aligning investments with individual risk appetite. The Sukanya Samriddhi Yojana offers predictability and tax efficiency but has limited scope for accelerated growth. Equities, in contrast, can significantly enhance wealth over the long run, provided investors are comfortable navigating uncertainty.

Goel notes that while the government scheme safeguards capital and ensures steady returns, equity investments reward consistency and long-term commitment. Each approach serves a different purpose within a broader financial plan.

A Balanced Approach for Long-Term Goals

For many households, the most practical strategy may involve combining both instruments. Allocating a portion of savings to a secure government scheme can create a financial safety net, while investing in equities can help build additional wealth over time.

Ultimately, the right choice depends on factors such as time horizon, financial objectives, and comfort with market risk. Parents seeking assured returns and minimal fluctuations may lean toward a guaranteed savings plan. Those willing to accept market volatility for potentially higher returns might consider equity investments. A diversified approach can help strike a balance between protection and growth, supporting long-term financial security for a daughter’s future.