Here is the single most important reason for not investing in the Sukanya Samriddhi Account. Someone with the profile name bhaiyamafkaro in reddits IndiaInvestments page pointed out an error in my post:
Here is a corrigendum.
My mistake: I thought one can open an account (age of daughter: 10 or less) and invest up to when she turns 21.
Fact: One can open an account if one has a daughter aged 10 or less (11 upto Dec. 2015 as a relaxation)
One must invest for 14 years after account is opened.
Partial withdrawal of 50% is allowed when she turns 18.
The account will mature 21 years after opening (this is independent of age of the daughter).
Why does this make the case even worse?
Have a look at the table and the graph (which conveys the same information)
Points to ponder:
1) As mentioned in the above post, education is more important than marriage. You can withdraw 50% only and at age 18. You may need the money to pay college admission fees before she turns 18.
2) Education inflation is 10% (conservatively!). You need to plan early and invest a sizeable about in equity. There is no other way about it. Don't waste 1.5L a year in this because it is EEE. Not all things offered free in life are good. In fact most of them are not!
3) You can invest only for 14Y (why?!!!!). Where you will invest for the remainder of the duration before education and marriage goals? You cant invest in equity then. You have missed the window of oppurtunity.
4) Most kids will be 22 or at best 23 when they will enter post-graduation. If your child is 4Y or more now, this money will not be useful to you!
5) Marriage expenses inflation is 10% (conservatively!). You need to plan early and invest a sizeable about in equity. There is no other way about it. Don't waste 1.5L a year in this because it is EEE. Not all things offered free in life are good. In fact most of them are not!
Do not lock your money in this scheme because it is EEE, because it says Sukanya!
Value liquidity, value inflation beating returns. Use equity oriented mutual funds +PPF or debt mutual funds for your child - be it a girl or a boy.
6) If you are reading this, this scheme is not meant for you! For God's sake this is meant for those who fix their child's marriage the moment she is born. This is for those parents who are itching to marry their daughter off regardless of her dreams. This is for those who don't care what her child studies as long as she can be married off.
* Thanks to someone with the profile name bhaiyamafkaro in reddits IndiaInvestments page for pointing this out.