Sukanya Samriddhi Yojana vs SBI Magnum Children's Benefit Fund: Know which investment option is better

Financial experts advise that people should not only plan for their future goals but also invest wisely to gain a better return.

Be it marriage or the education of children, financial planning plays an important role in achieving a future goal. Often people keep accumulating money for these goals in their savings accounts which earn far lower interest compared to other government schemes or schemes offered by public sector banks. Financial experts advise that people should not only plan for their future goals but also invest wisely to gain a better return. Sukanya Samriddhi Yojana and SBI Magnum Children's Benefit Fund are the two schemes aimed at the welfare of kids. 

Sukanya Samriddhi Yojana

The Ministry of Finance launched the Sukanya Samriddhi Yojana in 2019. Sukanya Samriddhi Yojana (SSY) is a small savings scheme for the benefit of the girl child. This government-run scheme is available in Post Offices or government-run banks. This account can be opened in the name of a girl child aged below 10 years. A maximum of two Sukanya Samriddhi Yojana accounts can be opened per family. A third account is permitted only in the case of the birth of twins/triplets. The Sukanya Samriddhi Yojana account can be opened with a deposit of Rs 250 per year and the maximum deposit can go up to Rs 1.5 lakh in a year. The maturity tenure for an SSY account is 21 years or until the girl child marries after the age of 18. However, money can be deposited into the account only for 15 years. The scheme offers an interest rate of 7.6 per cent. Also, one can claim income tax benefits under Section 80C on the investment amount. The interest earned from the scheme is tax-free.

SBI Magnum Children's Benefit Fund

SBI Magnum Children Benefit fund is a solution-oriented mutual fund and was launched in 2002. It gives two options to the investors - one is a savings plan and the other is an investment plan. SBI Magnum Children Benefit fund Saving Plan is a conservative hybrid fund and it allocates major funds towards debt and debt-related instruments and some part is invested into equities. The scheme has given a return of over 10 per cent since inception. Pankaj Mathpal, Founder and Managing Director, Optima Money Managers, said that the fund delivered a growth rate of over 5.3 per cent in the last one year and over 12 per cent in the last three years.

On the other hand, the SBI Magnum Children Benefit fund investment plan is an aggressive hybrid fund. "Of an aggressive hybrid fund, 65 per cent asset allocation is made into equity and equity-related instruments. As of August, the SBI Magnum Children Benefit fund investment plan's over 82 per cent asset allocation is into equity. The scheme has given a return of 13 per cent in the last one year. Since its inception in September 2020, its CAGR has been a little over 56 per cent. Also, this offers no tax benefits," said Mathpal.

Also, the short-term or long-term capital gain tax will apply to the earnings of the scheme. 

Which fund is better?

Say if you want to invest and build a corpus for your son, you cannot do it under the Sukanya Samriddhi scheme, then you should opt for the SBI Magnum fund. Mathpal said that the SBI Magnum Children's Benefit Fund offers a better return compared to the Sukanya Samriddhi scheme in the long run. "Since equity offers better returns in the long term, one can go for the SBI Magnum Children's Benefit Fund Investment plan. However, the choice between the Sukanya Samriddhi scheme and SBI Magnum Children's Benefit Fund entirely depends on a case-to-case basis," said Mathpal.