Investing in a Public Provident Fund (PPF) for minors can be a smart financial decision to secure their future. As a parent, there are some dos and don'ts you should consider to make the most of this investment for your child. Here's a guide to help you navigate PPF investment for minors.
Dos | Don'ts |
| 1. Open a PPF account in your child's name: To invest in PPF for a minor, you need to open a PPF account in their name with you as the guardian. This account will be solely for your child's benefit. | Don't withdraw prematurely: The PPF has a lock-in period of 15 years. Avoid withdrawing funds before the maturity period to reap the full benefits of compounding and tax-free returns. |
| 2. Utilize the long-term investment horizon: PPF is a long-term investment because it has a lock-in period of 15 years. Take advantage of this by starting early to allow the investment to grow and benefit your child during crucial life stages like higher education or marriage. | Don't forget to renew the account: After the initial 15-year period, the PPF account can be extended in blocks of five years. Make sure to renew the account to continue earning interest. |
| 3. Contribute regularly: Make consistent contributions to the PPF account. The minimum deposit is only Rs. 500 per year, but try to maximize the yearly limit of Rs. 1.5 lakh to maximize returns and tax benefits. | Don't exceed the contribution limit: The annual contribution limit to PPF is Rs. 1.5 lakh. Avoid depositing more than the prescribed amount, as the excess will not earn any interest. |
| Educate your child about financial planning: Involve your child in financial discussions and educate them about the importance of saving and investing. It will help them understand the value of the PPF investment when they are older. | Don't mix personal finances with your child's PPF account: Keep the finances separate and use the PPF solely for your child's benefit. Avoid using the funds for your personal needs. |
| Use PPF for tax planning: Contributions made to a PPF account are eligible for certain tax deductions under Section 80C of the Income Tax Act. Leverage this benefit to optimize your tax planning. | Don't ignore other investment options: While PPF is a safe and reliable investment, explore other investment avenues to diversify your child's portfolio and maximize potential returns. |
By following these dos and don'ts, parents can make informed decisions and ensure that the PPF investment for minors serves its intended purpose - securing a bright financial future for their children.
