Fixed Deposit for a Child - Types, Schemes, and Benefits

As a parent, securing your child’s future is a top priority. An FD tailored for children serves as a strategic tool to build a solid financial foundation. It offers various benefits, helping you finance the child’s further education. The maturity amount once received at adulthood could also ensure your child has the necessary funds to manage different expenses.   

If you start by booking an FD of ₹10 Lakhs at 7% p.a. for a tenure of 10 years, the total interest earnings would be over ₹9 Lakhs. Use an FD calculator to determine how much you need to invest for your child over a certain period to get the desired interest.  

The following are the features of some of the top FDs for children-

Here’s a detailed look into the different children's fixed deposit plans available in India:  

• PNB Balika Shiksha Fixed Deposit Scheme

It is designed for female students passing class VIII from Kasturba Gandhi Balika Vidyalayas. To qualify, students must enrol in class IX in a government, government-aided, or local body school.

• PNB Uttam Non-callable Term Deposit Scheme

Minors who have attained the age of 10 years can invest in the fixed deposit scheme for children. It allows you to opt for interest payments on a monthly, quarterly, half-yearly, or yearly basis. Alternatively, you could choose to receive the interest at maturity. 

• YES Bank Fixed Deposit for a Child

Invest in this FD plan for children on behalf of your child to save for future expenses like further studies or marriage. You can also get an overdraft facility with these deposits at competitive interest rates. 

• HDFC Bank Kids Advantage Account

This is a savings account for children that comes with a MoneyMaximizer (sweep-out) facility. Once the account balance exceeds ₹35,000, the surplus amount over ₹25,000 is automatically transferred to an FD.  

The process of investing in a fixed deposit for a child is just as simple as that of investing for an adult. Follow are some steps you may have to take as a parent or guardian to book a fixed deposit for a child:

1. Visit the bank or Non-banking Financial Company (NBFC) issuing FD Schemes for a child

2. Furnish identity verification for both the child and the responsible parent or guardian

3. Submit mandatory documents to complete the Know Your Customer (KYC) process 

The bank will verify the documents before giving approval. Once the application is processed, a new FD account for the child will be opened. However, the exact application process will vary across banks and NBFCs. You can check the FD booking process beforehand by visiting the nearest branch or on their online website. 

The parameters for investing in a fixed deposit for a minor depend on the bank you choose. Generally, banks require you to meet the following-

• The minor must be under 18 years old  

• The account holder should also be a parent or legal guardian and above the age of 18

To complete the FD application process for your child, you may have to furnish the following documents: 

• Minor’s birth certificate

• PAN card of the parent or guardian

• Identity proof of the parent or guardian, including an Aadhaar Card, voter ID, or driving licence

• Proof of residence

The withdrawal process of an FD in the name of a minor can vary depending on the bank and the type of FD you choose. Early withdrawal may also be subject to certain penalty charges. In certain cases, banks may allow withdrawals under certain conditions. These may include: 

• The minor has turned 18

• The minor is a girl and has completed the minimum years of education after the date of investment

• The minor is a boy and has cleared his class 10 final exams 

A crucial aspect of planning for your child’s future is securing their financial well-being. The following are some tips to secure this goal-

• Begin saving early to harness the power of compound interest and watch the money grow exponentially

• Keep track of the FD maturity date and reinvest the proceeds to maximise compounding benefits

• Opt for cumulative FDs to enjoy higher interest rates through annual compounding

• Understand the tax implications of FD interest to optimise your child's overall returns

• Spread out FD maturity dates to maintain liquidity and benefit from varying FD interest rates for the child.

With the rising costs of education, healthcare, and other essentials, it is important to ensure financial security for your child. Therefore, FDs are an ideal investment avenue for assured returns.

To help you better understand the returns you could earn for different tenures, you can use the FD interest rate calculator. This tool instantly determines the potential returns you could earn on your deposit based on the FD interest rate for minors, respective tenures, and the deposit amounts.

The information provided by BFDL is related to the rates provided by Banks and Deposit taking NBFCs as available from public domain and under no circumstances is intended to be source of advice or recommendation of any financial investment advice or endorsement of any sort. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers and use of such information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. Display of any intellectual property along with the related product information does not imply BFDL’s partnership with the owner of the intellectual property of such products and is solely for the purpose of information, unless otherwise provided by BFDL.