Sukanya Samriddhi vs Equity: Where Should Parents REALLY Invest?

As Indian parents, selecting the best option for your child's future means evaluating the various educational, marriage, and financial safety needs. It can become quite complicated as you look for the best options for investment for your daughter, focusing on Sukanya Samriddhi vs. equity. This guide examines the options. It analyses Sukanya Samriddhi returns, equity investment for children, child future planning in India, and more to help you strategise effectively, plan your investment for your daughter's future, and make informed choices.  

Even if you are a new parent or trying to improve the existing portfolio, knowing these options provides a strong testament to your decisions. Let’s simplify this.

What is the Sukanya Samriddhi Yojana?

Sukanya Samriddhi Yojana (SSY), launched in 2015 as part of the Beti Bachao Beti Padhao movement, is a government scheme focused on the empowerment of the girl child and the financial security of daughters by encouraging parents to start saving for their daughters from an early age. This scheme allows parents or guardians to open an account in the name of a girl child who is below 10 years of age, and the girl’s parents can keep contributing to the account until the girl completes 15 years of age. 

The scheme has a number of features and benefits. One of these is that parents can start their contributions with a minimum of ₹250 in a year. There is a limit of ₹1.5 lakh that can be deposited in the account in a financial year. The account matures at the age of 21, and if the girl child gets married before that age, the account will be closed. Additionally, if the girl child wishes to pursue higher studies, 50 % of the money can be withdrawn. 

Other benefits of the Sukanya Samriddhi Yojana Scheme include that contributions to the Sukanya Samriddhi account can be claimed under section 80C of the Income Tax Act. Furthermore, the interest earned and matured value of the account is tax exempt under section 10(10D) of the Income Tax Act. This makes the Sukanya Samriddhi Yojana Scheme one of the safest investments for child future planning in India.

As of December 2025, 4.53 crore accounts have been opened with deposits of more than 3.33 lakh crore. To open an SSY account, you can visit post offices or other banks that are SSY authorised. People have opened SSY accounts for both boys and girls, reflecting equality for all.  

Sukanya Samriddhi Returns

Interest is approved by the government and reviewed quarterly, so keep that in mind when calculating Sukanya Samriddhi returns. An 8.2% interest rate is given annually and compounded annually for the quarter of Jan-Mar 2026 (Q4 FY 2025-26). The interest is calculated based on the lowest account balance of the account holder for a given month.

To better understand compounding, if a parent saves ₹1.5 lakh for 15 years when their child is 6, with an interest of 8.2%, the parent would receive ₹71 lakh when their child turns 21. This is assuming that the interest rate remains constant, which in reality, interest rates of SSY have fluctuated between 7.6% and 9.2% since SSY started.

For parents looking to minimise risks, SSY is a good option, as there is no market risk and SSY provides good returns relative to fixed deposits. The downside is a long lock-in period (up to 21 years) and inflexible use, as the funds can only be used for the education and marriage of the girl child. If economic conditions lead to a reduction in rates, the returns may be worse than inflation. Even with the cons, for parents looking for the safest option to plan for their child’s future in India, SSY is a good option.

Equity Investments: High Growth Potential

On the other hand, equity investments for children will definitely lead to greater returns. These include stocks, mutual funds, etc. and aim to derive returns through capital gains and dividends. In India, even in the long run, markets for equity have always been better than instruments of fixed income, especially for long-term goals such as education and marriage of a child, which is over 10-20 years.

When you invest in an equity investment, you are betting on the growth of a company, or group of companies, to which you give your money. One of the most common examples is the Nifty 50 index, which has provided 11% annualised returns for 20 years, dividends included. In the past 10 years, Indian equities have returned an annual average of 13% and are the second-best performing region in the world for equities. Data collected for the past decades has shown average returns of 9-12% for 5-10 periods and with a 12-15% return in a favourable economic climate.

Children's future goals are a common motivation for parents to enter into Systematic Investment Plans (SIPs), particularly in equity investments. Investment of this sort helps in averaging out the volatility of equities due to market fluctuations by means of a process known as rupee-cost averaging.

Investments in Equity Linked Savings Schemes (ELSS) are also a means of saving tax, and qualify under the 80C tax-saving investment options, offering parents a similar benefit to a Sukanya Samriddhi Yojana (SSY). There are still risks associated with these accounts.

However. Investments in the stock market have a risk of dipping significantly (20-50%) during economic and financial downturns, such as during the financial crisis of 2008 which saw a recession and a dip of -51.8% in the equities market and a subsequent recession in 2009 in which the market strongly recovered and saw a return of 75.8% in the equities market. This risk-reward balance is key for aggressive investors in child future planning in India.

Equity Options for Your Daughter's Future

When considering the best investments for your child, child-focused equity-oriented mutual funds are a clear winner. These hybrid or equity-oriented funds are designed to achieve long-term goals such as education and have lock-in periods to prevent unintentional withdrawals before the periods of goal completion.

As of early 2026, some of the top performers are:

- SBI Magnum Children's Benefit Fund - Investment Plan: This fund has a 5-year CAGR of 34.35% due to its focus on high-growth equities, making it an aggressive hybrid fund. AUM: Approx. ₹1,500 crore, expense ratio: 1.5%. Best for high-risk tolerance.

- UTI Children's Equity Fund: This fund has a 21.34% 5-year CAGR, with 96% of its fund allocated to equities. AUM: ₹1,133 crore, expense ratio: 1.2%. Excellent for balanced growth.

- ICICI Pru Child Care Fund - Gift Plan: This fund has a 5-year CAGR of 19.14% and is also a hybrid fund with an equity-debt mix. AUM: ₹1,319 crore, expense ratio: 1.51%. Good for moderate risk.

Other funds to note are Axis Children's Gift Fund (3-year returns of 13-15%) and Tata Young Citizen Fund (5-year CAGR of 19.34%). For child education planning, flexible-cap funds like Parag Parikh Flexi Cap or HDFC Flexi Cap are suggested for wider equity exposure.

These funds generally have a 5-year lock-in period and are better suited for long-term goals. Starting with SIPs of ₹5,000 will assist in building a corpus. Investing in equities for children is also important as it can significantly increase wealth (for instance, a ₹1.5 lakh annual SIP at 12% can grow to ₹1 crore in 18 years), but always remember that diversification is important to spread out the risks.

Sukanya Samriddhi vs. Equity: Side-by-Side Examination

In the Sukanya Samriddhi vs Equity discussion, both offer advantages, but both offer different levels of risk.

- Returns: SSY offers a fixed, tax-free rate of 8.2%. Equity offers 11-15%. For the long, long-term, about 15 years, equity could outperform SSY by anywhere from 50-100%. However, SSY offers protection on the principal amount.

- Risk: SSY is risk-free, while equity is very risky, with market fluctuations.

- Tax: SSY is tax-free, but equity is taxed. Both qualify for 80C deductions for up to ₹1,50,000. SSY is tax-free while equity long-term gains (which exceed ₹1 lakh) are taxed at 12.5%.

- Liquidity: SSY has a hard lock-in for 18/21 years, while equity funds have better liquidity after the lock-in period, although child funds could still be restrictive.

- Suitability: SSY is the best investment for daughters if safety is the concern. Equity is best for individuals who are comfortable with risk.

A hybrid approach of 50-70% on equity coupled with SSY offers both protection and considerable growth within child future planning in India.

What to Think about Before Investing

In the Sukanya Samriddhi vs equity discussion, there are many variables to consider:

1. Time Horizon: For very long-term goals, say about 10 years away, equity is probably the best option. SSY is better for conservative investors.

2. Inflation: Educational expenses increase by 8-10% each year. Equity performs better in this context.

3. Diversification: Spread the risk. Along with PPF or insurance, hurdle rates can be defended.

4. Economic Outlook: Equity works well in a growing economy. In a downturn, SSY cushions the fall.

Conclusion: Choosing Wisely for Your Child's Prospects

Sukanya Samriddhi vs. equity is ultimately about congruence with your objectives, not which is superior. While equity investments for children unlock greater potential through market development, SSY offers safe, tax-free Sukanya Samriddhi returns for guaranteed savings. When it comes to kid's future planning in India, a hybrid approach frequently yields the best investment for the daughter.

Begin early, make regular investments, and evaluate every year. Your daughter deserves the best for her future, whether that means studying overseas or having her ideal wedding. Which will you pick?

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.