Financial Planning for a Child: What the Numbers Actually Say

Those figures are from the Ministry of Statistics consumer price index, base 2024, released on 12 August 2026. The 10% to 12% “education inflation” quoted in almost every Indian child-planning article is not a government figure. It is used to sell products.

Why the inflation number changes your plan

If education costs grow slower than headline inflation, you need less return, not more. A plan built on 10% assumed inflation pushes you into higher risk than the goal requires.

That said, do not read 3.52% as the whole story. It measures the average basket of education services in India. A private international school or an overseas degree is not that basket. Your own cost line may run faster, and a rupee-funded foreign degree also carries currency risk.

Use the official number as the floor for a domestic education goal. Add your own evidence, from your own school’s fee history, if you are funding something above the average.

Which instruments are built for a child’s goal?

Is Sukanya Samriddhi worth it?

At 8.2% it is the highest sovereign-guaranteed rate a household can get. The National Savings Institute lists that rate as applicable to the July to September 2026 quarter. Deposits qualify for a deduction under section 80C and the institute states the interest is free from income tax under section 10.

The catch is the term. SSY matures 21 years after opening, and deposits run for 15. Most education spending starts at 18. The scheme allows a withdrawal of up to 50% of the previous year’s closing balance after the girl turns 18 or passes class 10, whichever comes first.

So half the money is available near the goal and half is not. If the goal is an undergraduate degree, that is a real mismatch. Plan the other half elsewhere.

Two more rules matter. One account per girl, and at most two per family, with a narrow exception for twins or triplets. Premature closure is allowed on death, or on compassionate grounds such as a life-threatening illness, and not before five years.

One trap to avoid. The 2019 gazette still prints 8.4% and 7.6% in an illustration. Those are 2019-20 figures. Quote the current quarterly rate instead.

The PPF rule most parents get wrong

You may open a PPF account for a minor as guardian. You may not thereby double your limit.

Paragraph 4(2) of the PPF Scheme, 2019 is explicit. The ₹1,50,000 maximum “shall be inclusive of the deposits made in his own account and in the account opened on behalf of the minor”. One guardian, one minor account per child, no joint accounts. The rate is 7.1%, listed to 30 September 2026.

Should you use NPS Vatsalya?

Probably not for the tax break. It is open to Indian citizens under 18, including NRIs and OCIs. It takes ₹250 to open and ₹250 a year, with no maximum. The guardian runs the account.

At 18 there are three routes. Continue in the scheme up to 21. Shift the whole corpus into the ordinary NPS after fresh KYC. Or exit, taking the full amount if it is below ₹8,00,000, and otherwise 80% as a lump sum with 20% going into an annuity.

The tax argument is weak. The ₹50,000 deduction under section 80CCD(1B) is an old regime deduction. The new regime is the default and does not allow it. For most families it is worth nothing. See the current slabs to check which regime you are in.

The bigger objection is the annuity. Money locked for a retirement wrapper is not education money.

What to buy before any of this

Term insurance on the earning parent. Every one of these plans assumes the deposits keep arriving. A term plan is what makes that true if they do not. See term insurance options.

Then match the instrument to the horizon. Money needed within three years belongs in deposits. Money needed in fifteen years can take equity risk, through a low-cost demat account or a mutual fund. Avoid bundling cover and investment together; read how ULIP charges work before anyone sells you a child plan.

Finally, keep the education loan in view. Interest on one is deductible in the old regime and the loan itself is a legitimate part of a funding mix. See education loans.