Kolkata: While the NPS Vatsalya scheme is expressly meant for long-term investment for the child, it helps parents to generate a substantial amount of money simply be tapping the giant compounding strength over a long period of time. It is an option under NPS and it is regulated by PFRDA (Pension Fund Regulatory Authority of India). Any individual can open this account for the benefit of his/her child, who is an Indian citizen. The parents operate the account but the child is thew sole beneficiary.

How much can the child get at 18 years?

Tale the following example. Say a child is born on January 1, 2026. The parents of the child open an NPS Vatsalya account in the very first month and starts investing Rs 5,000 every month in it. The expected return is 12% — the template that is sued for mutual fund returns. If the family continues this investment without a break, they can accumulate an amount of Rs 34,22,297, or Rs 34.22 lakh when the child turns 18. This amount is significant enough to bear a part of the higher education expenses of the child or even help him/her to set up a business. Or, it could be used for the wedding expenses of the youth.

The amount rises significantly higher if the amount is raised to Rs 8,000 a month. It jumps to Rs 54,75,675 or Rs 34.75 lakh when the child turns into an adult. If the family can push up the invest to Rs 10,000 from the very first month, the fund accumulated turns out to be Rs 68,44,593.

Account turns into regular NPS account

The NPS Vatsalya account turns into a regular NPS (Tier-I) as the child turns 18 even without an application. It happens automatically. Henceforth, it will act as an adult account and the beneficiary will can use it just like any adult and reap the benefit of long term compounding. He/she is free to carry it till the age of retirement. It means the child can reap the fruits of 60 years of investment in NPS, which is bound to generate a big corpus with a relatively small monthly investment.