FD vs Mutual Fund for Kids: Which Grows ₹50K More?

This Diwali, many parents want to invest for their kids instead of buying toys. We break down whether a Fixed Deposit, mutual fund SIP, or plain cash makes the most sense for a child's financial future.

Here's what happened: Diwali season prompts parents to explore meaningful financial gifts for children — FDs, mutual funds, and cash are the three most common choices debated.. Children's FDs can be opened in a minor's name with a parent or guardian as joint holder; most major banks and post offices offer this facility with standard interest rates.. Mutual fund folios for minors are legally permitted in India; the account must be converted to a regular adult folio once the child turns 18 before any redemption is allowed..

What you should do: Open a minor's FD at your bank or India Post this week — you need the child's birth certificate, PAN (or Form 60), and your own KYC documents as guardian.. Start a ₹500/month SIP in a minor's mutual fund folio through any SEBI-registered AMC's app — choose an index fund to keep costs under 0.2% expense ratio.. File your ITR correctly by declaring your child's FD interest above ₹1,500 under your own income to avoid a tax notice later — use Schedule SPI in ITR-1 or ITR-2..

Pro tip: Post Office Sukanya Samriddhi Account (for daughters up to age 10) currently earns 8.2% per annum — fully tax-free under Section 80C and EEE status — making it the highest guaranteed return available for a girl child's long-term savings.

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