Fixed Deposit for children or Sukanya Samriddhi Yojana? Here's how the two savings options compare

Parents planning for their children's education or future expenses often face a common question: should they invest in a bank fixed deposit (FD) designed for children or opt for the government-backed Sukanya Samriddhi Yojana (SSY)? While both are considered relatively safe investment avenues, they differ significantly in terms of eligibility, returns, tax benefits, flexibility and investment tenure.

SSY is available only for girl children and offers a government-guaranteed return, whereas children's FDs are offered by banks for both boys and girls, providing greater flexibility in investment amount and withdrawal.

Sukanya Samriddhi Yojana

The Sukanya Samriddhi Yojana currently offers an interest rate of 8.2% per annum, compounded annually, for the April-June quarter of FY2026-27. Parents or legal guardians can open an account for a girl child below the age of 10 years and invest between ₹250 and ₹1.5 lakh every financial year.

The scheme requires deposits for 15 years, while the account matures 21 years from the date of opening. One of its biggest attractions is its EEE (Exempt-Exempt-Exempt) tax status. Investments qualify for deduction under Section 80C, interest earned is tax-free, and the maturity amount is also exempt from tax.

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With its higher interest rate, SSY currently outperforms several traditional government savings schemes, including the Public Provident Fund (PPF), which offers 7.1%, and many bank fixed deposits.

Sukanya Samriddhi Yojana vs Other Savings Schemes: Interest Rate Comparison

Options	Interest rate	Compounding
Sukanya Samriddhi Yojana (SSY)	8.2%	Annually
Public Provident Fund (PPF)	7.1%	Annually
Bank Fixed Deposits	6.0%–8.0%	Varies by bank

Source: Government notifications and bank websites.

Children's fixed deposits offer flexibility

Unlike SSY, children's fixed deposits are available for both boys and girls. Several banks offer dedicated deposit schemes that allow parents to build a corpus for their children's future while enjoying fixed returns.

For example, Yes Bank offers children's FDs with tenures ranging from seven days to ten years. The bank currently offers interest rates of up to 8% for general customers on select tenures, with facilities such as premature withdrawal, auto-renewal and overdraft.

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Similarly, Punjab National Bank's Balika Shiksha Scheme is designed specifically for eligible girl students studying in government schools. The scheme allows deposits up to ₹3,000, with the amount remaining locked until the beneficiary turns 18 and satisfies specified educational conditions.

Unlike SSY, however, most children's FDs do not offer the same level of tax benefits, and interest earned may be taxable depending on the investor's income.

PNB Balika Shiksha Scheme FD Interest Rates (Below ₹3 Crore Deposits)

Tenure	General Customers	Senior Citizens
7–45 days	3.50%	4.00%
46–90 days	4.50%	5.00%
91–179 days	5.50%	6.00%
180–270 days	6.25%	6.75%
271–299 days	6.50%	7.00%
300 days	7.05%	7.55%
303 days	7.00%	7.50%
1 year	6.80%	7.30%
400 days	7.25%	7.75%
More than 2 years to 3 years	7.00%	7.50%
3–5 years	6.50%	7.00%
More than 5 years to 10 years	6.50%	7.30%

Yes Bank Children's Fixed Deposit Interest Rates (Below ₹2 Crore Deposits)

Tenure	General Customers	Senior Citizens
7–14 days	3.25%	3.75%
15–45 days	3.70%	4.20%
46–180 days	5.00%	5.50%
181–271 days	6.25%	6.75%
272 days to less than 1 year	6.50%	7.00%
1 year	7.75%	8.25%
1 year 1 day to less than 18 months	7.75%	8.25%
18 months	8.00%	8.50%
18 months 1 day to less than 24 months	7.75%	8.25%
24 months to less than 36 months	7.25%	7.75%
36 months to 60 months	7.25%	8.00%
Above 60 months to 10 years	7.00%	7.75%

Which option should parents choose?

The choice depends largely on financial goals.

Parents looking for maximum long-term returns and tax savings for a daughter may find Sukanya Samriddhi Yojana more suitable because of its higher interest rate, government backing and tax advantages. However, the scheme is exclusively for girl children and comes with a long lock-in period.

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On the other hand, children's fixed deposits may suit parents who need greater flexibility. They can choose different tenures, invest larger amounts depending on the bank's limits, and in many cases access premature withdrawal facilities in case of emergencies.

 Sukanya Samriddhi Yojana vs Children's FD at a glance Feature      

Feature	SSY	Children FDs
Eligibility	Girl child below 10 years	Boys and girls (varies by bank)
Interest rate	8.2% p.a.	Around 6%-8% p.a. depending on bank
Tax benefit	Section 80C + tax-free interest and maturity	Generally limited or none
Lock-in	21 years (15-year contribution period)	Flexible, depending on tenure
Premature withdrawal	Restricted	Available in many bank schemes
Investment limit	₹250 to ₹1.5 lakh per year	Varies by bank

For parents focused on long-term wealth creation for a daughter, SSY remains one of the most rewarding low-risk savings options. Those seeking flexibility or investing for a son may find children's fixed deposits a more practical choice, especially when paired with other long-term investment avenues.