Fixed Deposit Option for Child Future

What are Fixed Deposit Schemes for Children?

A fixed deposit for child is a simple savings plan. Parents or guardians deposit a fixed amount in a bank or NBFC for a set number of years. The money earns interest. When the child turns 18 or meets certain conditions, they get the full amount with interest.

This type of plan does not change with the market, i.e., it is independent of market fluctuation and will give a fixed return.⁶

Many parents choose this to save for school fees, college, or wedding costs. It helps create a savings fund for the future. Some banks also offer a fixed deposit scheme for girl child, which may include special interest rates or benefits.

Benefits of Fixed Deposit Schemes for Children

• FDs offer investors a fixed and assured return for their cash deposits.
• Terms offered by fixed deposits have earnings rates exceeding those of normal savings accounts and recurring deposit options. The money is likely to grow at an accelerated rate due to this benefit.
• Some FDs are tax-saving FDs. The tax-saving instruments found under Section 80C of the Income Tax Act enable you to deduct up to ₹1.5 lakh in annual taxation. FDs have lock-in terms of 5 years that limit your fund withdrawal during the specified period.
• Banks, in addition to opening an account offline, now also enable you to start an FD through their online platforms that enable bank account access using mobile applications or web platforms.
• This is a simple and low-risk way to save money for your child.¹

Creating Fixed Deposits for Children

Below are the steps to open a fixed deposit for child:

1. Visit a Bank or NBFC: Go to your preferred bank or Non-Banking Financial Company (NBFC) branch or their official website.
2. Fill in Required Details: Provide personal details of both the child and the parent/guardian responsible for the account.
3. Submit Necessary Documents:
   • Identity proof of the child and parent/guardian
   • Address proof
   • Age proof of the child
   • Passport-size photographs 
4. Verification Process: The bank/NBFC will verify all the submitted information and documents.
5. Account Opening: Once the verification is complete, a new FD account will be opened in the child’s name, with the parent or guardian acting as the account holder until maturity.

 

Note: The exact process may vary slightly depending on the bank. It’s always a good idea to check with the specific bank or NBFC for their exact requirements and procedure.²

 

Documents Required for a Fixed Deposit for a Child

To open a fixed deposit in a child’s name, you will generally need to submit the following documents. However, exact requirements may vary depending on the bank or NBFC, so it’s best to confirm with the branch or official website before applying:³

• Child’s Date of Birth proof (like birth certificate or school ID)
• Minor’s Aadhaar card (mandatory in many banks)
• Parent or guardian’s Aadhaar card and PAN card
• Photo ID of the parent or guardian (such as a voter ID, passport, or driving license)
• Current address proof (utility bill, rental agreement, etc.)

If you're opting for a fixed deposit scheme for a girl child, like Sukanya Samriddhi Yojana (SSY), some additional forms and conditions may apply. These schemes sometimes offer extra benefits for girl children, subject to the terms and conditions of the scheme — you may enquire about the same with the bank or NBFC before applying.

Make sure the documents submitted are valid and not expired. You can upload scanned copies online or submit them in person at the bank.

Once everything is verified, the FD account will be opened, and the deposit will start earning interest.

Planning for Children’s Future

Here are a few points to consider before getting a fixed deposit for child:

• Align tenure with goals and financial situation: Select tenure depending on your goals and financial situation.
• Compare interest rates: Some banks offer higher rates.
• Pick flexible payout options: Some plans allow early withdrawal for school or college needs.
• Set clear goals: Know why you’re saving—college, wedding, etc.

You could also use a fixed deposit for child, along with a savings or child insurance plan to build a bigger safety fund. That way, even if something happens to the parent, the child’s future is not affected.

Always check the terms carefully before putting money in any plan.

Who Can Withdraw from a Child FD Scheme?

Money from a child fixed deposit plan can only be taken out when:

• The child turns 18 years old.
• The child has passed Class 10 exams.
• For girls – after two years of education post Class 9.

These rules make sure the money stays untouched and grows. It helps the child use the money for important life goals. In most cases, the bank will ask for school certificates or ID proof before allowing the withdrawal².

Conclusion

The simple and secure approach to child savings involves opening a fixed deposit account. Such an investment approach enables parents to make advanced financial plans. The plan provides financial backing as well as reassurance during schools and colleges and major lifetime milestones.