Should you open a PPF account for your children?
The answer is YES.
Can you open a PPF account for your children?
Yes. The PPF account rules allow you to open a PPF account for minor children.
And what is the minimum age for opening a PPF account for a child? There is no age limit to open a PPF account of a minor child as per the Minor PPF account rules. So don’t worry about the Minimum age for PPF account opening.
I know you would say that if equity can easily beat PPF returns in the long run, then what is the point of opening a PPF account for children? Or you may feel that children should open their PPF account on their own when they grow up and start earning.
But it might just make ‘some’ sense to open it for them today itself (when they are still young).
Let’s see why…
Suppose your child finishes higher education around 22/23 and starts earning. Now if they open their PPF account at 23, the lock-in of 15 years would begin at that time. So to get full and unrestricted access to the PPF investments, they would have to wait till they turn 38 (23 when account opened + 15 years lock-in of PPF).
But if you open it for them today (when they are young – let’s say 2 years old) and keep it active, you are helping them big time.
You are helping them slowly pass through the lock-in period. And by the time, they are old enough and begin earning, they will have a PPF account that has much lesser restrictions and shorter lock-in* period than a freshly opened account.
* Lock-ins after initial maturity of 15 years is in blocks of just 5 years.
They will thank you for your vision. 🙂
And a reduction in the lock-in period for your children is one of the major benefits of PPF account for minors.
Once your child becomes an adult and turns 18, the operation of the PPF account would be handled by him/her, i.e., his/her signature will be required to withdraw or deposit money.
So if you were to ask me – What is the Best age to open a PPF account?
The best age to open a PPF account is as early as you possibly can. Remember that there is no minimum age (as per the PPF rules) when you can open and start PPF investing for your child. So don’t wait for it. Do it as early as you can.
You can just keep the PPF account of children active by making notional small minimum investments every year. Or you can use it as part of your investments for the child’s education and/or marriage.
The best part about PPF is that it is still useful for your children even after maturity. They can take it over and continue it for their own investment planning when they start earning.
As for you as a parent, you can open it today and make contributions – to make investments towards children-specific financial goals too – like their higher education and marriage.
But do note that both the parents cannot open a separate PPF account for the same child. One child can have only one PPF account. And it can be opened either by the father, mother, or the guardian.
Another confusion that people have about handling multiple PPF account is that they want to invest full Rs 1.5 lakh in each PPF account. But that is not allowed as per PPF rules. The correct rule is that – the Rs 1.5 lakh limit of deposit in a given financial year by an individual is a combined limit for his self-account and for accounts opened by him on behalf of minor children. If caught, you face the risk of losing entire interest retrospectively on the excess PPF investments made each year.
So don’t get too excited and deposit Rs 1.5 lakh each in your and all children’s PPF account. Limit your contribution to your PPF account + children’s PPF accounts to a total of Rs 1.5 lakh per financial year. But if you have 2 children, then you can open a PPF account for one child and your spouse can open a PPF for the second child. That way, you get a combined limit of Rs 1.5 lakh + Rs 1.5 lakh = Rs 3 lakh for the family.
But let me be clear about one thing here…
Even when I am asking you to open a PPF for your children, it doesn’t mean that you should save only via the PPF route for their goals (like Higher Education and Marriage Planning). These are long term goals that require equity heavy investment plan. But that doesn’t mean you should be 100% equity. The debt part of the investment plan can be managed using a PPF (assuming children are young and have several years before their goal days).
But just for academic discussion, let’s see what would happen if someone managed to put in full Rs 1.5 lakh (as per current limit) annually for 15 years for their children.
At 7.1% the corpus after 15 years would be about Rs 40-41 lakh!
That’s a good start for a child who is yet to earn his/her first rupee. 😉
And just imagine if this corpus remains untouched (somehow) and continues to earn 8% every year till the child is close to retirement??
Assuming the PPF completes 15 years when the child completes 18, the investment would become a massive Rs 9-10 crores if allowed to earn 8% for another 25 years! Ofcourse the exact figure might be different as PPF rates will change periodically in the initial 15 years and investment limits too might be increased. But I hope you get the idea. J You may end up completing your child’s retirement planning even before they start earning. 😉 But there is a moral aspect of that discussion – which I won’t touch here.
You can try out different scenarios using this PPF for Child Calculator.
By the way, the Minor PPF account interest rates are the same as the regular PPF account interest rates.
So go ahead and open a PPF account for your children as soon as you can
This way, you will give them a solid start in their financial planning – years or decades before they even realize it.
I hope you now know a bit more about the Minor PPF account rules and know the right answer to questions like Should I open a PPF account for children in 2022?