This blog explores the best fixed deposits and child-saving schemes in India, comparing interest rates, and safety. It helps parents choose reliable, goal-aligned options to secure their child’s financial future.
Planning for your child’s future shapes many of your everyday financial decisions such as how much you save, what you spend on, and what you choose to delay. After all that effort, what most parents like you want is simple: stability and the assurance that the savings made for your child should grow without surprises.
And in a world full of complex and fast-changing financial products, fixed deposits (FDs) continue to offer what feels rare these days: assured returns. They grow at a steady pace, while keeping your capital safe, and giving you a clear sense of what to expect. A fixed deposit can be that first dependable step you take towards financial security for your child.
Let’s break down what makes fixed deposits reliable and explore further investment schemes for your child’s financial future.
Why Choose a Fixed Deposit for Your Child’s Future?
Fixed deposits remain one of the most popular choices amongst investors who want stable and secure returns. And when it comes to securing your child’s future, they can be the most suitable bet. They’re insulated from market volatility, unaffected by daily market swings, and carry a government-backed safety net through the Deposit Insurance and Credit Guarantee Corporation (DICGC), which protects deposits up to ₹5 lakh in the unlikely yet unfortunate event of a bank default.
You can align the FD tenure with your child’s future milestones as well. For instance, a 10-year fixed deposit can mature right when your child enters college, ensuring the funds are ready without any last-minute financial stress. Similarly, if you invest ₹2 lakh in an FD that compounds at 7% annually when your child is 5 years old, it can grow to over ₹3.9 lakh by the time they turn 15. That amount can support tuition, extracurricular activities, or the beginning of a college fund.
But the common question remains, is it enough? To answer that, let’s look at some FD plans available in India and how they stack up.
Best Fixed Deposit Plans for Children in India
Here are some of the top fixed deposit schemes designed or suited for children and their future goals:
| Bank | 1-year FD | 3-year FD | 5-year FD |
| State Bank of India (SBI) | 6.25 | 6.30% | 6.05% |
| Punjab National Bank | 6.25% | 6.40% | 6.25% |
| Union Bank of India | 6.40% | 6.60% | 6.40% |
| HDFC Bank | 6.25% | 6.45% | 6.40% |
| ICICI Bank | 6.25% | 6.60% | 6.60% |
| Suryoday Small Finance Bank | 7.40% | 7.25% | 8.05% |
| Slice Small Finance Bank | 7.25% | 7.50% | 7.00% |
(Interest rates as of Nov’25)
Each of these schemes offers depositors capital safety and stable returns. However, if you’re looking for more than basic security, such as tax benefits, higher returns, or insurance coverage; several banks and insurance providers offer FD-like child plans that combine these features. Let’s look at those options.
SBI Child Policy and FD-like Child Investment Plans
Beyond traditional FDs, several banks have developed child-focused savings and investment plans that go a step further—blending security with flexibility and, in some cases, insurance protection.
SBI Smart Scholar Plan
SBI’s Smart Scholar Plan, for instance, though not a fixed deposit, combines the safety of market-linked investment (a Unit-Linked Insurance Plan or ULIP) with life coverage.
Similarly, HDFC and ICICI Bank offer hybrid child plans that link fixed deposits with recurring savings or goal-based accounts. These allow parents to build a disciplined monthly savings routine, gradually accumulating a lump sum that matures just when it’s needed, be it for school, higher education, or an early start in life.
Sukanya Samriddhi Yojana
Another widely trusted choice for parents of girls is the Sukanya Samriddhi Yojana (SSY), a government-backed scheme that helps families build long-term financial security. SSY offers one of the highest guaranteed returns among small savings schemes at 8.2% per annum. It also falls under the EEE tax category, which means your contributions, interest earned, and maturity amount are all completely tax-free under Section 80C.
PPF Account for Minors
A PPF account for minors is a reliable long-term savings option you can use to build a secure financial foundation for your child. It offers 4.1% interest per annum until your child turns 18, after which the standard PPF rate of 7.1% applies. With a maximum yearly deposit limit of ₹1.5 lakh and a 15-year lock-in period, a PPF account for minor provides stable, government-backed returns along with complete tax exemptions on contributions, interest earned, and maturity proceeds under Section 80C.
National Savings Certificate (NSC)
An NSC is another dependable, government-backed option for your child. Parents or guardians can open an NSC for a minor below 10 years, while children aged 10 or above can open it on their own. This scheme offers a fixed 7.7% annual interest rate with a 5-year lock-in period, making it suitable for medium-term goals. You can start investing with as little as ₹1,000 and contribute any amount beyond that, while also claiming tax deductions of up to ₹1.5 lakh under Section 80C. NSC includes a nomination facility and can be used as collateral for loans, providing both safety and flexibility.
For parents who are comfortable with FDs only, there is a way you can earn higher yields with FDs.
FDs with Small Finance Banks
A major limitation of large bank FDs is that they often fail to beat inflation. In comparison, FDs from small finance banks typically offer 1.5% to 2.5% higher returns, which can help you outpace an average inflation rate of around 6%. Many small finance bank FDs also have an added layer of security through DICGC insurance. If you’re exploring options beyond traditional bank FDs, Jiraaf features high-yield fixed deposits that can offer returns of up to 8.5% annually.
While these products provide a strong foundation, choosing the right one requires understanding a few key aspects that make an FD truly effective for long-term goals.
Factors to Consider While Planning an FD for Your Child
Here are the essential factors to weigh before opening an FD:
- Tenure Alignment
Aligning your FD’s tenure as per your child’s future financial commitments is crucial. For instance, a 5-year FD may work well for near-term needs like hobby courses, while a 10-year one could support larger milestones such as education-related expenses.
- Interest Rate and Compounding
Exploring quarterly or annual compounding over longer periods can make a noticeable difference to returns, since compounding often amplifies growth compared to simple interest.
- Safety and Credibility
Checking for DICGC insurance coverage of up to ₹5 lakh per depositor also offers additional peace of mind.
- Nomination and Joint Holding
Some parents opt for a joint FD with their child (as a minor). It may simplify future ownership and can also serve as a gentle introduction to financial awareness.
- Liquidity and Premature Withdrawal
It’s useful to look at withdrawal rules in advance. Understanding penalties or restrictions can help you stay prepared if funds are needed earlier than planned.
- Tax Implications
Interest from a minor’s FD is generally clubbed with a parent’s income. However, there is a small relief available, up to ₹1,500 per child under Section 10(32).
- Reinvestment Options
Auto-renewal can be helpful if you want compounding to continue seamlessly, especially for longer-term goals.
Thoughtful planning around these factors turns a simple FD into a financial roadmap; one that aligns with your child’s life milestones. The next important element to consider is the tax treatment of FD interest, as it directly affects the net returns you receive.
Taxation on Fixed Deposits
Taxes may not be the most exciting part of planning, but they have a real impact on what your child’s investment finally earns. Here’s a simple breakdown for clarity:
- Tax Deducted at Source (TDS) on interest
Generally, banks deduct 10% TDS when your FD’s annual interest exceeds ₹40,000, if you’re not a senior citizen.
- TDS without PAN
If PAN details aren’t updated, TDS deduction can rise to 20% of your annual interest. It’s always better to link your PAN to avoid higher deductions.
- Form 15G/15H to avoid TDS
If your total income is below the taxable limit, submitting Form 15G (or 15H for senior citizens) prevents unnecessary deductions.
- Taxation for minors
When an FD is in a child’s name, the earned interest is usually added to the parent’s income. However, Section 10(32) allows an exemption of ₹1,500 per child per year.
Understanding these tax rules helps you see the real return, not just what’s on paper.
Once you have a clear view of taxation, it becomes easier to compare FDs with other long-term savings options designed for children.
Long-term Savings for Children: FD vs Other Options
While FDs are safe, it’s worth comparing them with other long-term options for your child’s future, especially when balancing growth and security.
| Factor | Fixed Deposit (FD) | NBFC / Small Finance Bank FD | Public Provident Fund (PPF) | Sukanya Samriddhi Yojana (SSY) | Mutual Fund SIPs |
| Risk Level | Very Low | Low to Moderate | Low | Very Low | Moderate to High |
| Expected Return (p.a.) | 6.5% – 7.5% | 7.5% – 8.5% (varies by NBFC/SFB) | 7.1% (tax-free) | 8.2% (tax-free) | 9% – 12% |
| Liquidity | Moderate (premature withdrawal rules apply) | Moderate (premature withdrawal rules apply) | Locked for 15 years | Locked till age 21 | Highly flexible |
| Best For | Safe short-to-medium-term goals | Higher fixed-income returns with limited risk | Long-term education savings | Daughters’ education and marriage | Long-term wealth creation with market exposure |
Each option serves a different need. FDs provide certainty, while instruments like PPF and Sukanya Samriddhi offer tax efficiency and higher returns over longer durations, while mutual fund SIPs can offer higher returns if you’re open to moderate to high market risk.
Final Thoughts
Every parent knows that raising a child brings more hope than guarantees. You can’t predict what they’ll dream of becoming, but you can do your best to make sure money never limits that choice. A fixed deposit’s steadiness offers quiet reassurance when life feels uncertain.
It’s the base you build on, and once that’s secure, you can add growth options like PPFs or mutual fund SIPs for future goals such as education or skill development.
If the details ever feel complex, seek advice early. The right plan isn’t about chasing returns; it’s about peace of mind and the comfort of knowing your child’s future is already taking shape.
