How to Set Up a Fixed Deposit Account for a Minor

Safeguard your child's future with Fixed Deposits (FDs). Fixed Deposits offer stable and assured returns, ensuring consistent growth. Unlike market-linked instruments like stocks or mutual funds, FD interest rates remain fixed throughout the tenure, undeterred by market fluctuations. 

In this blog, we have simplified how to set up an FD for your child.

Benefits of Investing in a Fixed Deposit Plan for Your Child

Investing in minor savings plans comes with several advantages. Let's take a look at some of them:

• Financial Security: A fixed deposit plan ensures financial security for your child's future milestones, such as higher education or marriage.
  
• Higher Interest Rates: FDs offer higher interest rates compared to Savings Accounts. Also, the interest is calculated via the compound interest method, ensuring long-term growth. For example, if you make a fixed deposit of ₹50,000 for five years at 7.20% p.a. for your minor child, you will get ₹71,437 at maturity.
• Overdraft Facilities: During an emergency, you can opt for overdraft against your FD. The interest is charged only on the utilised amount. You can repay the amount as per your convenience, before the maturity date.
• Flexible Tenure: FD plans typically come with flexible tenure options, allowing you to choose the duration that suits your child's needs. The tenure generally ranges from 7 days to 10 years.

Setting Up a Fixed Deposit Account for a Minor

Here's how you can open a Digital Fixed Deposit with Ujjivan SFB:

• Step 01: Enter your mobile number, PAN and Aadhaar
• Step 02: Enter Deposit details and complete the payment
• Step 03: Provide personal details
• Step 04: Complete video KYC (08:00 AM To 08:00 PM)
• Step 05: Receive FD receipt and maximize your returns!

Documents Required

To open a Digital Fixed Deposit, you would need the following documents:

• PAN card
• Aadhar card

Please ensure your mobile is linked to Aadhar to experience a seamless account opening journey.

Maximising Returns and Planning for Your Child's Future

When setting up a fixed deposit account for a minor, it's essential to consider long-term planning. Here are some tips to help you maximise returns and plan for their future:

• Start early: The earlier you start investing in a fixed deposit account for your child, the more time their money has to grow through compounding interest.
  
• Regular monitoring and reinvestment: Keep track of maturity dates and reinvest the funds to continue earning compound interest.
  
• Tax implications: Understand how the interest earned on your child's FD will be taxed and plan your investments accordingly.
  
• Opt for cumulative fixed deposits: Cumulative FDs generally offer higher interest rates as the payout at maturity is compounded annually.
  
• Automatic renewal: Enable automatic renewal of FDs to avoid missing out on continuous interest accumulation.
  
• Use Laddering strategy: Stagger the maturity dates of multiple FDs to have regular intervals of liquidity and benefit from varying interest rates over time.

By following these strategies, you can make the most of your child's fixed deposit account and ensure a secure financial future for them.