Here are the strong points and the weak points of the Sukanya Samriddhi Account Yojana.
Pros of Sukanya Samriddhi Yojana
Tax exemption: the biggest benefit is that the scheme is tax-exempt at every stage (the deduction on deposits needs the old tax regime; the interest and maturity amount are tax-free either way). When you judge any investment against your goals, you should look at the return after tax. A fixed deposit paying 10% gives someone in the highest tax bracket only about 7%.
Guarantee: your principal is completely safe, and so is the interest payment.
Rate reviewed every quarter: the interest rate isn't fixed for the whole term, but it moves in line with interest rates in general. That is a safeguard in itself, because it means the Sukanya Samriddhi Yojana scheme can survive when rates rise or fall.
Worth remembering: years ago, many people invested in schemes like UTI's Rajlakshmi Unit Scheme, which guaranteed a maturity amount that worked out to a return of a little over 16%. When interest rates started falling, the scheme couldn't keep that promise. It was launched in 1992-93 and wound up early in 2000. Many parents who had relied on it for their daughters' education or marriage were left bitter. Sukanya Samriddhi Yojana is designed so that this can't happen.
Lock-in: the lock-in can be a pro as well as a con. You need discipline to build a decent corpus. Plenty of people dip into their investments for things that feel urgent at the time, and lose the wealth they could have built for their goals. This scheme builds that discipline in by default.
Investment limit: PPF has an investment limit of Rs.1.5 lakhs a year. If husband and wife both earn, each can put up to Rs.1.5 lakhs into their own PPF account. But if they want to invest in PPF in their child's name, the rule says the limit of Rs.1.5 lakhs a year covers the parent and the child together. So in effect, Father + Child1 + Child2 = Rs.1.5 lakhs, or Mother + Child1 + Child2 = Rs.1.5 lakhs. If the child is a girl, a Sukanya Samriddhi account is an excellent way to invest more on top of that.
Cons of Sukanya Samriddhi Yojana
Limited investment: there is a cap on how much you can put in. If you plan to send your daughter abroad to study, this account alone won't be enough.
Since it is a fixed-return scheme, a cap on investment is to be expected.
Age limit: once a girl is over 10, you can't open an account for her. The rule probably has a social purpose: to protect young girls who might otherwise be married off early and never get a chance at higher studies.
Illiquidity: parents who stretch themselves to save in this scheme may struggle if their finances get worse, because the money can't be withdrawn before the girl turns eighteen or passes Class 10, and even then only half of it, for her education.
Should I invest in Sukanya Samriddhi Yojana?
It is an excellent scheme for a girl child, both socially and as an investment. If you have a daughter, consider it for your portfolio. If the debt part of your asset allocation allows it and you can afford it, invest the full amount for the full term of the scheme.
Before you put in more money, keep an eye out for big cuts in the interest rate or bad changes to the tax rules. A very low rate, or the scheme being made taxable, would be a reason to invest less in it.
On the social side, tell the people who support your household about Sukanya Samriddhi Yojana. Domestic helpers, drivers, cleaners and others can benefit from knowing about it, so their daughters are provided for as they grow up. The lock-in makes sure the money is there when the girls need it.
Parents of young boys may well wish there were a scheme like this for sons too.