Public Provident Fund: This PPF trick can increase your money by 300% in 10 years!

Retirement, Pension Planning: Public Provident Fund is one of the safest ways to save money for retirement. It offers a fairly high interest rate of 8% at present.

Any individual can open the PPF account in their own name as well as on behalf of a minor at banks and also at post office. Image source: Reuters

Retirement, Pension Planning: Public Provident Fund (PPF) is one of the safest ways to save money for retirement. It offers a fairly high interest rate of 8% at present. It is also one of the safest financial tools that may help investors become crorepati in the shortest possible time, thanks to the power of compounding. Normally, people withdraw their PPF deposit after 15 years. However, the PPF account can be extended further in blocks of five years each. You would be surprised to know that by extending the PPF account for just two blocks of five years each, the final amount could be over three times (or 300%) higher than what you may get after 15 years.

Suppose you start investing the maximum amount of Rs 1.5 lakh (Rs 12,500 per month) at the age of 25, then at the current rate of interest of 8%, this amount may grow up to Rs 4398645 in 15 years. However, if you continue the account and remain investing 1.5 lakh per year for another 10 years, then your final amount would be over Rs 1.2 crore! Surprised? Here's how it works:

If you start the PPF account with an investment of Rs 1.5 lakh, then it earns 8% interest (Rs 12,000) in the first year. In the second year, you will earn an interest of 8% on Rs 150000 + Rs 12000 + Rs 150000. This will be around Rs 24960.

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PPF Calculator @8% per annum interest


Yr	Opening Balance	Amount Deposited	Interest Earned	Closing Balance
1	0	150000	12000	162000
2	162000	150000	24960	336960
3	336960	150000	38957	525917
4	525917	150000	54073	729990
5	729990	150000	70399	950389
6	950389	150000	88031	1188420
7	1188420	150000	107074	1445494
8	1445494	150000	127640	1723134
9	1723134	150000	149851	2022985
10	2022985	150000	173839	2346824
11	2346824	150000	199746	2696570
12	2696570	150000	227726	3074296
13	3074296	150000	257944	3482240
14	3482240	150000	290579	3922819
15	3922819	150000	325826	4398645
	Total Deposit	2250000	Interest earned	2148645

Similarly, in the third year you will earn an interest of 8% on 150000 +Rs 12000 + Rs 150000 + Rs 24960 + Rs 150000. This will be Rs 38957. Continuing this way (as shown in the chart above), you will earn a whopping Rs 2148645 interest in 15 years. In another 10 years, the whole amount will become over Rs 1.2 crore. This is almost thrice the amount you could have got in 15 years. This amount will come handy in your days post retirement.

In case, you do not want to invest beyond 15 years, even then you can continue the account for another 10 years. In the period, you will continue to earn the applicable interest rate. In this case also, the money will grow up to over Rs 96 lakh if the interest rate remain unchanged..

Any individual can open the PPF account in their own name as well as on behalf of a minor at banks and also at post office. Opening of PPF accounts in the name of Hindu Undivided Family is not permitted. One can make a minimum deposit of Rs 500.00 and maximum Rs.1,50,000 per annum may in the PPF.

(Note: The above is for explanation purpose only. The PPF interest rate is revised by the government periodically. Hence, the final outcome in the long run may vary.)

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