Save ₹166 Daily for Your Child and Get ₹16.27 Lakh Through PPF

One of the most popular long-term savings options is the Public Provident Fund (PPF). Introduced by the Central Government in 1986, the scheme continues to be preferred by those looking to build savings for future needs such as children’s education, marriage expenses and retirement.

The key feature of PPF is the benefit of compound interest. Interest is earned on the amount invested, and subsequent interest is also calculated on the accumulated interest.

A PPF account can be opened at any post office in India by submitting the application form along with a passport-size photograph and the required KYC documents.

Parents or legal guardians can open and manage a PPF account on behalf of their children. The scheme currently offers an interest rate of 7.1%, which is revised once every quarter.

Suppose parents open a PPF account for their child and save ₹5,000 every month. Saving approximately ₹166 per day would help accumulate ₹5,000 a month, or ₹60,000 a year.

If this amount is invested every year for 15 years, the total investment would be ₹9 lakh.

At an interest rate of 7.1%, the investment could earn around ₹7.27 lakh as interest. At maturity, the total amount, including the principal and interest, would be approximately ₹16.27 lakh.

The maturity period of a PPF account is 15 years. After 15 years, the account can be extended in blocks of five years. This extension is optional, and the account can also be closed after maturity to withdraw the accumulated amount.

The account can be extended for multiple five-year periods. During the extension period, the required yearly contribution can continue as per the applicable rules.

A minimum of ₹500 and a maximum of ₹1.50 lakh can be invested in a PPF account in a financial year.

If ₹5,000 is invested every month for 20 years, the total investment would be ₹12 lakh. The estimated interest earnings would be around ₹14.63 lakh, taking the total maturity amount to approximately ₹26.63 lakh.

If the investment continues for 30 years, the total contribution would reach ₹18 lakh. The estimated interest would be around ₹43.80 lakh, resulting in a maturity amount of approximately ₹61.80 lakh.

Therefore, the longer you remain invested, the greater the potential benefit from the power of compound interest.