Yet many parents continue to target an education corpus of ₹30-40 lakh, often without accounting for inflation, rising private education costs or the possibility of overseas studies. So, if the goal is to build a sizeable corpus that can be accessed when a child turns 18, which investment route stands out: PPF, SSY, NPS Vatsalya or mutual funds?
The Bigger Problem: Most parents are saving for the wrong number
Before comparing products, experts argue that parents first need to understand the scale of future education costs.
Education inflation of 10-12% means costs roughly double every six to seven years. Engineering courses could require anywhere between ₹50 lakh and ₹1 crore by the time today’s newborn reaches college age. A private MBBS degree could cost ₹2-4 crore, while an overseas undergraduate programme may require ₹2.4-4 crore.
Research also suggests that a significant number of parents underestimate education expenses, resulting in sizeable shortfalls when the actual bills arrive. This means choosing the right investment vehicle is only half the battle; setting a realistic target corpus is equally important.
Mutual Funds: The front-runner for building an education corpus
On pure returns, mutual funds emerge as the strongest contender. For a monthly SIP of ₹3,000 over 15 years, a mutual fund generating 12% annual returns could create a corpus of about ₹15.1 lakh, the highest among the four options under comparison.
Mutual funds also offer complete flexibility. Unlike fixed-tenure products, they have no maturity restrictions, allowing parents to redeem investments precisely when college fees become due. This makes them naturally aligned with the goal of funding higher education at age 18.
However, higher returns come with behavioural challenges. Investors often stop SIPs, switch funds or exit during market downturns. Studies show that while equity mutual funds have delivered strong long-term returns, many investors have earned significantly less because they failed to stay invested through market cycles.
For disciplined investors, mutual funds remain one of the few options capable of matching or exceeding education inflation over the long term.
SSY And PPF: Safe, tax-free, but can they keep up?
For parents prioritising capital protection, Sukanya Samriddhi Yojana (SSY) and the Public Provident Fund (PPF) continue to be popular choices.
SSY currently offers 8.2% tax-free returns and is available exclusively for girl children. PPF offers 7.1% tax-free returns and is open to all investors. Both enjoy EEE (Exempt-Exempt-Exempt) tax status, making them attractive from a tax-efficiency perspective.
The challenge, however, is education inflation. With education costs rising by 10-12% annually, returns from both SSY and PPF may struggle to preserve purchasing power over long periods.
Access to funds is another consideration. While PPF matures after 15 years, SSY allows only partial withdrawal at age 18 and matures when the girl child turns 21. As a result, both products may work better as supporting instruments rather than standalone education-planning solutions.
NPS Vatsalya: Child investment plan or retirement product?
NPS Vatsalya sits between traditional savings schemes and market-linked investments. Based on assumptions of 10% annual returns, a ₹3,000 monthly investment could accumulate around ₹12.5 lakh over 15 years, placing it ahead of SSY and PPF but behind mutual funds.
The key question is whether it is truly designed for education planning.
Withdrawals before age 18 are restricted, and only limited amounts can be accessed for specific purposes such as education, illness or disability. In many cases, a substantial portion of the accumulated corpus remains linked to annuitisation requirements, effectively converting savings into a retirement income stream.
This structure means NPS Vatsalya may be more suitable as a long-term retirement-oriented product for the child rather than a dedicated vehicle for paying college fees at age 18.
The final takeaway
If the sole objective is to build the largest education corpus that can be accessed when a child turns 18, mutual funds appear to have the strongest case. They offer the highest growth potential, flexibility and a greater likelihood of keeping pace with education inflation.
SSY can be a useful addition for parents of girl children seeking guaranteed, tax-free returns, while PPF provides stability and capital protection. NPS Vatsalya, meanwhile, appears better suited to long-term retirement planning than higher education funding.
Ultimately, the biggest risk may not be choosing the wrong product, but underestimating how much a child’s education could actually cost.
