Power of compounding: Here's how much minimum you need to invest monthly in PPF to make your child a crorepati

The public provident fund (PPF) is a top choice when it comes to long-term financial planning. Launched by the Centre in 1986, it is a reliable, low-risk government backed savings scheme with consistent and guaranteed returns and can be used to meet financial goals such as funding of wedding, children's education abroad, buying a house, retirement fund or even building wealth.

A PPF account can be easily opened at any post office or bank branch across India by submitting an application form, photo and mandated KYC documents. For minors, the parent / legal guardian can open an account, which must be converted to major status once the primary account holder turns 18 years of age.

Parents can consider the instrument as a wealth builder for their child over the long-term future. Today, we calculate the minimum amount you would need to invest in their PPF per month in order to successfully set them up for “crorepati” status in the long run.

Notably, the age at which you begin investing at has a large impact on the total PPF corpus accumulated at time of withdrawal (usually between 50-60 years of age). When investing for your children, beginning early has dual advantage — it gives the corpus a longer time to accumulate interest, thus making maximum benefit of compounding interest; and it allows you to significantly reduce the minimum monthly investment required to reach your target.

For example, if you begin investment from the year your child is born, with long-term view of staying invested for the next 50 years, the monthly amount required to reach crorepati status is ₹1,900 per month. PPF is offering interest rate of 7.1% at present, below is how the calculation works out for every 5-year delay:

As seen with the above calculations, delaying investment by just a few years can have significant impact on how much you will need to invest in order to generate the same target corpus. Notably, investing after age 25 would require at least ₹18,000 per month and more with each year's delay, to reach crorepati status.

And while reaching the “crorepati” could be achieved by gradually increasing your investment amount, time is the biggest factor when it comes to capturing the full benefit of compounding. Further, investing larger amounts monthly in PPF also may not be feasible or tax beneficial for most salaried individuals.

Thus, to set your children up for success, a key factor is to start early and remain invested for extended period in order to make the most of your investment.

Disclaimer: This story is for educational purposes only. We advise investors to check with certified experts before making any investment decisions.

Jocelyn Fernandes is a journalist and editor with nearly 13 years of experience covering the business, corporate, economy and markets beats in news.<br> As chief content producer for around three years at Livemint (Hindustan Times), Jocelyn publishes breaking stories, explainers, features and live blogs on a range of business and economy topics, including the Budget, corporate developments, stock markets, income tax, money and personal finance, cryptocurrency, government policy, impact of US tariffs, international developments and more.<br> Jocelyn's writing philosophy is focused on delivering news in an accurate and accessible format for readers. She thus focuses her news coverage on explainers and FAQs in order to breakdown business, corporate, economic, and policy topics that are of importance to everyday readers.<br> She holds a Bachelors in Mass Media (BMM) and Post Graduate Diploma (PGD) in Journalism and Communication and has previously written for online business and markets news site Moneycontrol (Network18), Business-to-business (B2B) trade publications — the industry magazines Power Today and Solar Today (ASAPP Media), and the national news agency United News of India (UNI).<br> Outside of work, Jocelyn keeps up-to-date with local and international news, enjoys reading fiction books, novels a...