Do not Invest in Sukanya Samriddhi Account even if it is EEE!

So the Sukanya Samriddhi Account is now EEE. Investments, interest and maturity are tax-free like PFF. Here is why it means nothing and why I will never invest in it if I have a daughter (I don't).

1) You can withdraw only 50% at the age of 18. My imaginary daughters education is more important to me that her marriage. So I would appreciate higher liquidity.   I also find this feature bizarre.

2) Many, if not most, children graduate from school at age 17. The money will still be locked in this fancy sounding instrument.  Fantastic!

3) Account will mature at age 21 or when she gets married. Fantastic again. Not much use to me.

I would rather open a PPF account the day she is born and invest about 40% here and rest in equity mutual funds.  After 15 financial years, the full PPF corpus  is liquid.

The idea is to have full liquidity on the entire corpus when she is about to enter college.

Liquidity is more important that returns. Adequate exposure to equity mutual funds will offset the 1% difference in return between Sukanya Samriddhi Account and PPF.

Verdict:  Do not lock your in money in this fancy sounding scheme.  It is not meant for those who read personal finance blogs.

Read more: 

Budget 2015: Tax-Free Infrastructure Bonds

Budget 2015: National Pension Scheme

New Delhi Investor Workshop on financial planning and goal-based investing

Register with the screen below or from the registration page

If you have friends or relatives in Delhi who you think could benefit from this workshop, please forward this link to them.

Install Financial Freedom App! (Google Play Store)

Install Freefincal Retirement Planner App! (Google Play Store)

book-footer

Buy our New Book!

You Can Be Rich With Goal-based Investing A book by  P V Subramanyam (subramoney.com) & M Pattabiraman. Hard bound. Price: Rs. 399/- and Kindle Rs. 349/-. Read more about the book and pre-order now!
Practical advice + calculators for you to develop personalised investment solutions

Thank you for reading. You may also like

About Freefincal

Freefincal has open-source, comprehensive Excel spreadsheets, tools, analysis and unbiased, conflict of interest-free commentary on different aspects of personal finance and investing. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. We do not accept sponsored posts, links or guest posts request from content writers and agencies.

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete  the entire comment or remove the links before approving them.

19 thoughts on “Do not Invest in Sukanya Samriddhi Account even if it is EEE!

  1. Aninda

    Hi Pattu sir,

    What are your views on the accidental insurance of Rs 2 lakhs p.a on an annual premium of Rs 12. Seems good to me. If there are any caveats please advise. Also what is the process ?

    Reply
  2. Aninda

    Hi Pattu sir,

    What are your views on the accidental insurance of Rs 2 lakhs p.a on an annual premium of Rs 12. Seems good to me. If there are any caveats please advise. Also what is the process ?

    Reply
  3. Shaibal Kumar Bhaduri

    I beg to have other opinion. You can't expect all the features from one scheme. Like you don't have liquidity in PPF also and the interest is floating. In my opinion it is one of the most attractive option to help one or two of Investors goal having features like risk free, tax exemption and long term fixed and higher return. Don't scrap it considering only one goal, because we value your opinion and follow the most.

    Reply
    1. freefincal

      It is meant for only goal: expenses associated with the girl child. People who like risk-free returns are those who do not understand inflation risk. Inflation in education and marriage will always be higher than this interest rate.

      Reply
  4. Shaibal Kumar Bhaduri

    I beg to have other opinion. You can't expect all the features from one scheme. Like you don't have liquidity in PPF also and the interest is floating. In my opinion it is one of the most attractive option to help one or two of Investors goal having features like risk free, tax exemption and long term fixed and higher return. Don't scrap it considering only one goal, because we value your opinion and follow the most.

    Reply
    1. freefincal

      It is meant for only goal: expenses associated with the girl child. People who like risk-free returns are those who do not understand inflation risk. Inflation in education and marriage will always be higher than this interest rate.

      Reply
  5. ritesh singh

    Better option for those who will wait for six more years or you can say who will manage her undergraduation...

    Reply
  6. ritesh singh

    Better option for those who will wait for six more years or you can say who will manage her undergraduation...

    Reply
  7. praveen

    I think this article considers that people are not already investing in PPF. Such number of people will be very low.

    There is no seperate PPF corpus for children.
    Deposits in PPF can be a maximum of 1.5 lakhs which includes both your account and your kids account or 3 lakhs considering husband+wife.

    Sukhanya Samrudhi is a good option for those who have already used up this PPF amount.

    Again Sukhanya Samrudhi can be again considered as part of debt asset (in asset diversification ) category. So it is not like either equity or this scheme.

    The main and only limitation I see in this scheme is the liquidity.
    Also just because you open this account does not mean you have to use the entire allowed limit per year.
    You can open the account and only invest surplus which you sure know can be locked.

    My views.

    Reply

Do let us know what you think about the article