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Fixed Deposit for Child Plans

Every parent wants a safe & secure future for their children, especially financially. That is exactly where a fixed deposit for child can help you by offering direct as well as guaranteed returns on investment plans offered by banks and NBFCs. As investors, parents get to earn a fixed interest rate on the principal invested for the predefined tenure of the FD.

The corpus keeps growing until the child reaches maturity age, after which the child can either continue to operate the FD or redeem it. ...Read More

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FD for Child Plans

FD Schemes for Children

Fixed Deposit for Child Plans
October 29, 2024

Table of Content

Why Choose a Fixed Deposit for Your Child?

1. To Secure Their Future Savings

Right from the day your child is born, you need to start financial planning for their short as well as long term future, such as schooling, life insurance, higher education, and marriage. That is where opting for a specific child investment plan in the form of a fixed deposit for a child can help you secure your children's future and save a considerable amount for each stage of their life.

2. To Make a Profit on Your Investment

Given that fixed deposits offer you a fixed interest rate as a return on your investment, you are most likely to make a profit from your FD once it matures. Unlike market linked investment options such as mutual funds, stocks, etc, or gold and real estate, which have their own share of ups and downs, fixed deposits offer you guaranteed returns along with profit, as the amount upon maturity is more than the principal invested.

3. To help your child learn about managing money responsibly

Until your child reaches maturity age, you, as a parent or guardian, open and operate the FD account. But when your child reaches maturity age, he/she will operate the account and can choose to either continue the investment or redeem the FD. This way, the responsibility of managing the FD or even the maturity amount upon redemption is what helps your child learn about how to manage money from a young age.

Benefits of Fixed Deposit Schemes for Children

  • Parents/guardians can open a fixed deposit for a child who is aged as young as just one year old.
  • FD rates can go as high as 6%-9% p.a. depending on different banks and tenures.
  • Fixed deposit offers risk free as well as guaranteed returns upon the plan’s maturity.
  • The tenure for FDs usually ranges between 7 days and 10 years.
  • Through child fixed deposit plans, parents/guardians can save and invest for the children’s short and long term future.
  • The best fixed deposit plan for child needs a small amount as the initial investment.
  • No need to possess the headache of investing at regular frequencies.
  • A safety net gets created for your children through a fixed deposit for child.
  • The FD can be conveniently opened online in just a few clicks, without the hassle of visiting bank or NBFC branches multiple times.

Who Can Withdraw from a Child FD Scheme?

The Child FD scheme can only be withdrawn in the following conditions:

  • If the child has turned 18 years of age.
  • If the child has successfully completed as well as passed Class X board examinations.
  • If the girl recipient has completed at least two years of studies after her enrollment in class IX.

Documents required for a Fixed Deposit for a Child

Below mentioned is the list of documents required to invest in a fixed deposit for child:

1. The minor child’s date of birth

2. Parent/guardian’s PAN card number

3. Parent/guardian’s Driving License/Voter ID/photocopy of Passport/Aadhar Card

4. Parent/guardian's address proof

How to Open a Fixed Deposit for Child

A parent/guardian can decide to open a fixed deposit for a child by following these steps:

  • Step 1

Visit either the official website or branch of the respective bank or NBFC. You can also choose to use online net banking.

  • Step 2

Enquire about the FD investment at the branch, or click on the Fixed Deposit section on the website or net banking of the bank or NBFC.

  • Step 3

Now, enter all the details of both the child as well as the parent/guardian wherever required.

  • Step 4

Carefully upload all the required documents, including photographs, ID proofs, etc., and complete the KYC.

  • Step 5

Once you have duly filled out the application, the respective bank/NBFC will verify all the details you provided.

  • Step 6

After completion of the verification of the information and proofs, your fixed deposit for child gets opened.

Summary

Many banks and NBFCs (Non-Banking Finance Companies) have been offering lucrative interest rates on FDs that can help financially secure your child's future. The key benefits of fixed deposits for children include risk-free and guaranteed returns, a wide range of deposit tenures from 7 days to 10 years, the option to open FD for children aged as low as one year old, etc. But before you hop onto the decision to invest in these, make sure you have clear financial goals in mind, as well as the investment horizon, expected returns, etc. You can also consider child insurance plans and child savings plans when planning to secure your child’s future financially in case of your untimely demise.

FAQs on Fixed Deposit for Child

Q: What is a Fixed Deposit (FD) for a child?

FD (Fixed Deposit) plans for children are special investment schemes offered by banks, NBFCs, and post offices. Parents/guardians of the child can deposit money in such schemes on behalf of the child, who, upon maturity, receives the corpus.

Q: What is the minimum & maximum tenure for a child Fixed Deposit?

The minimum and maximum tenures for child FDs usually range between 7 days and 10 years.

Q: Are the returns from a Fixed Deposit for a child taxable?

Yes. Returns from FD, even those opened in the name of a minor child, are taxable as per your income tax slab's applicable rate after adding the credited interest as additional income.

Q: What should I consider before opening a Fixed Deposit for my child?

If you want to choose a safe investment option to secure your children’s future, you can opt to open fixed deposit for child. But make sure you are clear about your financial goals, investment tenure, expected returns, taxability, etc, before opening the fixed deposit.

Q: What is the minimum age for FD?

Parents/guardians can open a fixed deposit for a child who is aged as young as just one year old.

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Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Note- Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

^. Save 46,800 on taxes if the insurance premium amount is Rs.1.5 lakh per annum and you are a Regular Individual, Fall under 30% income tax slab having taxable income less than Rs. 50 lakh and Opt for Old tax regime.

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