Every parent dreams of building a secure financial future for their children. Whether it’s for higher education, marriage, or simply a safety net, small savings today can turn into a big support tomorrow. One such safe and popular option is the Post Office Recurring Deposit (RD) Scheme.
If you deposit ₹13,000 every month in a Post Office RD account for 5 years, you can accumulate nearly ₹9.27 lakh at maturity. Let’s understand how this works, the calculation, and whether this is the right choice for your child’s future.
How the Post Office RD Scheme Works
The Post Office RD is a government-backed small savings scheme where you deposit a fixed amount every month. The interest is compounded quarterly, which helps your savings grow faster. It’s considered one of the safest investment options since it carries no market risk.
Calculation – ₹13,000 Monthly for 5 Years
Based on the current 5-year RD interest rate of 6.7% per annum (Q3 2025), here’s how your investment grows:
- Monthly Deposit: ₹13,000
- Tenure: 5 years (60 months)
- Total Investment: ₹13,000 × 60 = ₹7,80,000
- Interest Earned: ~₹1,43,000
- Maturity Value: ~₹9,23,000
This is very close to ₹9,27,753, which means a slightly higher interest rate (if revised in future quarters) could help you achieve that exact figure.
Key Features of Post Office RD
Tenure: Fixed 5 years (can be extended in blocks of 5 years).
Compounding: Interest is compounded quarterly.
Minimum Deposit: ₹100 per month.
Government Guarantee: 100% safe and backed by India Post.
Premature Withdrawal: Allowed, but with reduced returns.
Should You Choose RD for Your Child’s Future?
The RD scheme is perfect for parents who want:
- A safe and guaranteed return option.
- A disciplined savings habit through monthly deposits.
- A short- to medium-term savings plan (5 years).
However, if your goal is to create a much larger corpus for education or marriage (beyond ₹9–10 lakh), you may want to consider alternatives with higher returns.
Alternatives That Offer Higher Returns
- Public Provident Fund (PPF)
- Best for: Long-term goals (15 years).
- Interest Rate: 7.1% (compounded yearly).
- Benefits: Tax deduction under Section 80C, tax-free maturity.
- Sukanya Samriddhi Yojana (SSA)
- Best for: Girl child savings.
- Interest Rate: 8.2%.
- Benefits: Triple tax exemption (investment, interest, maturity).
- Post Office Monthly Income Scheme (MIS)
- Best for: Parents who want steady monthly income.
- Interest Rate: 7.4% with monthly payouts.
Things to Keep in Mind
- Interest Rates Change: Post Office revises rates every quarter, so future returns may vary.
- Tax Treatment: Interest earned on RD is taxable.
- Evaluate Goals: RD works well for short-term saving, but for long-term wealth creation, PPF or Sukanya Samriddhi may be more suitable.
- Professional Advice: Always consult a financial advisor before making a major savings plan for your child.
The Post Office RD Scheme is one of the simplest, safest, and most reliable ways to save for your child’s future. By investing ₹13,000 every month, you can build a corpus of nearly ₹9.27 lakh in 5 years.
While it won’t make you crorepati overnight, it instills discipline in saving and provides a secure, risk-free return—a perfect starting step for any parent who wants to safeguard their child’s financial future.
FAQs
Q1. Is Post Office RD better than FD?
RD helps you build savings gradually with monthly deposits, while FD requires a lump sum. For those who can invest monthly, RD is better; for those with spare funds, FD works well.
Q2. Can NRIs open a Post Office RD account?
No, Non-Resident Indians (NRIs) are not eligible to open Post Office RD accounts.
Q3. Is the interest earned on Post Office RD tax-free?
No, the interest earned is fully taxable as per your income tax slab. Unlike PPF or Sukanya Samriddhi, RD does not offer tax-free maturity.
Q4. Can I withdraw my RD before 5 years?
Yes, premature closure is allowed after 3 years, but you will get a lower interest rate than the contracted one.
Q5. Can I extend my RD after maturity?
Yes, you can extend the account in blocks of 5 years if you want to continue saving.