Fixed Deposit Option for Child Future

What are Fixed Deposit Schemes for Children?

A fixed deposit for child is a simple savings plan . Parents or guardians deposit a fixed amount in a bank or NBFC for a set number of years. The money earns interest. When the child turns 18 or meets certain conditions, they get the full amount with interest.

This type of plan does not change with the market, i.e., it is independent of market fluctuation and will give a fixed return. ⁶

Many parents choose this to save for school fees, college, or wedding costs. It helps create a savings fund for the future. Some banks also offer a fixed deposit scheme for girl child, which may include special interest rates or benefits.

Benefits of Fixed Deposit Schemes for Children

• FDs offer investors a fixed and assured return for their cash deposits.
• Terms offered by fixed deposits have earnings rates exceeding those of normal savings accounts and recurring deposit options. The money is likely to grow at an accelerated rate due to this benefit.
• Some FDs are tax-saving FDs. The tax-saving instruments found under Section 80C of the Income Tax Act enable you to deduct up to ₹1.5 lakh in annual taxation. FDs have lock-in terms of 5 years that limit your fund withdrawal during the specified period.
• Banks, in addition to opening an account offline, now also enable you to start an FD through their online platforms that enable bank account access using mobile applications or web platforms.
• This is a simple and low-risk way to save money for your child. ¹

Creating Fixed Deposits for Children

Below are the steps to open a fixed deposit for child:

1. Visit a Bank or NBFC: Go to your preferred bank or Non-Banking Financial Company (NBFC) branch or their official website.
2. Fill in Required Details: Provide personal details of both the child and the parent/guardian responsible for the account.
3. Submit Necessary Documents:
   • Identity proof of the child and parent/guardian
   • Address proof
   • Age proof of the child
   • Passport-size photographs 
4. Verification Process: The bank/NBFC will verify all the submitted information and documents.
5. Account Opening: Once the verification is complete, a new FD account will be opened in the child’s name, with the parent or guardian acting as the account holder until maturity.

Note: The exact process may vary slightly depending on the bank. It’s always a good idea to check with the specific bank or NBFC for their exact requirements and procedure. ²

Documents Required for a Fixed Deposit for a Child

To open a fixed deposit in a child’s name, you will generally need to submit the following documents. However, exact requirements may vary depending on the bank or NBFC, so it’s best to confirm with the branch or official website before applying: ³

• Child’s Date of Birth proof (like birth certificate or school ID)
• Minor’s Aadhaar card (mandatory in many banks)
• Parent or guardian’s Aadhaar card and PAN card
• Photo ID of the parent or guardian (such as a voter ID, passport, or driving license)
• Current address proof (utility bill, rental agreement, etc.)

If you're opting for a fixed deposit scheme for a girl child, like Sukanya Samriddhi Yojana (SSY), some additional forms and conditions may apply. These schemes sometimes offer extra benefits for girl children, subject to the terms and conditions of the scheme — you may enquire about the same with the bank or NBFC before applying.

Make sure the documents submitted are valid and not expired. You can upload scanned copies online or submit them in person at the bank.

Once everything is verified, the FD account will be opened, and the deposit will start earning interest.

Planning for Children’s Future

Here are a few points to consider before getting a fixed deposit for child:

• Align tenure with goals and financial situation: Select tenure depending on your goals and financial situation.
• Compare interest rates: Some banks offer higher rates.
• Pick flexible payout options: Some plans allow early withdrawal for school or college needs.
• Set clear goals: Know why you’re saving—college, wedding, etc.

You could also use a fixed deposit for child, along with a savings or child insurance plan to build a bigger safety fund. That way, even if something happens to the parent, the child’s future is not affected.

Always check the terms carefully before putting money in any plan.

Who Can Withdraw from a Child FD Scheme?

Money from a child fixed deposit plan can only be taken out when:

• The child turns 18 years old.
• The child has passed Class 10 exams.
• For girls – after two years of education post Class 9.

These rules make sure the money stays untouched and grows. It helps the child use the money for important life goals. In most cases, the bank will ask for school certificates or ID proof before allowing the withdrawal ² .

Conclusion

The simple and secure approach to child savings involves opening a fixed deposit account. Such an investment approach enables parents to make advanced financial plans. The plan provides financial backing as well as reassurance during schools and colleges and major lifetime milestones.

FAQs

Q1: What is a Fixed Deposit (FD) for a child?

A child FD is a savings plan where parents keep money safely in the bank. It earns interest over time. When the deposit matures, the child can receive the full amount with interest for future needs like education, marriage, etc.

Q2: Are the returns from a Fixed Deposit for a child taxable?

Yes, the interest earned on a child’s Fixed Deposit is taxable. Since the account is in the name of a minor, the interest income is clubbed with the parent’s income and taxed as per the parent’s income tax slab if the income is offered on an accrual basis.

However, if the parent chooses to offer the interest income on a cash basis and the original FD tenure is set to mature when the child turns 18, the entire interest earned can be taxed in the child’s hands, not the parent’s. But this method must be followed consistently ⁵ .

Q3: What should I consider before opening a Fixed Deposit for my child?

Before opening a child FD, think about your goal, how long you want to save, expected returns, and tax rules. You could also check interest rates from different banks and decide.

Q4: What is the minimum age for FD?

Most banks and NBFCs allow you to opt for child fixed deposit plan when your child is just 1 year old. You, as the parent or guardian, operate the account until the child turns 18 or meets specific rules ² .

Q5: Who can open an FD account for a child?

A parent or legal guardian can open the FD on behalf of the child. The adult manages the FD until the child reaches maturity or becomes eligible to handle the account as per the bank’s rules and guidelines.

Q6: How to do a fixed deposit for a child?

You can open a child FD by visiting a bank branch or using online banking. Fill out the form with the child’s and your details, upload ID proof along with other documents, which may vary from bank to bank, complete KYC, and any other additional procedure given by the bank, make payment to start the deposit.

Q7: How can I set up a savings account for my child?

You can open a savings account or fixed deposit (FD) for your child either online or by visiting a bank/NBFC branch. Here's how:

• Offline:

  Visit the nearest bank or NBFC branch with your documents and your child’s ID, birth certificate, and passport-size photos. Ask to open a minor savings account or FD. The account will be opened in the child’s name, with you as the guardian and caretaker until the child turns 18.

• Online:

  Go to the bank’s official website, select the savings account or FD section for minors, and fill in the required details. Upload scanned copies of Aadhaar, PAN, age and address proof, and photographs. After verification, the account will be activated.

Q8: How are children’s fixed deposit interest rates determined in 2025?

The interest rates depend on both the banking institution and the individual deposit amount, together with the selected term period. Review the current rate list before picking a fixed deposit for your child.

Q9: What is the difference between a Fixed Deposit and a Recurring Deposit for a child?

The main difference lies in the way money is invested:

• Fixed Deposit (FD):

  You deposit a lump sum amount once, and it earns interest over a fixed period. It’s ideal when you have a large one-time amount to invest for your child’s future.

• Recurring Deposit (RD):

  You deposit a fixed amount every month, making it suitable for those with a steady monthly income who want to save gradually ⁴ .