If you are 35, have one or two kids and a salaried job, you are probably juggling school fees, home EMIs and the usual “we should really start saving properly” conversation. For most Indian families in this stage, the first two safe options that come to mind are the Public Provident Fund and a bank fixed deposit. Both are low risk and easy to understand, but they behave very differently once you look at taxes, time horizon and real returns.
What the numbers look like in 2025
PPF currently pays 7.1 percent per year, set by the government and reviewed every quarter, and the current rate has been held steady for several quarters. Interest is effectively tax free and the amount you invest up to the usual yearly limit is eligible for the main tax deduction bucket. On the fixed deposit side, large banks are offering roughly 6.25 to 6.45 percent for one-to-three-year deposits, while some smaller or specialised institutions are quoting up to about 7.3 percent for selected tenures.
On paper that can make an FD look slightly better if you chase the highest headline rate. The catch is that FD interest is fully taxable if you are in a higher tax slab. Once you knock off tax, the post-tax return on many deposits slips below what PPF quietly gives you. Over ten to fifteen years, that difference in tax treatment and compounding matters a lot more than a few decimal points in a rate card.
How PPF fits into a 35-year-old’s life
At 35, you still have a long working life ahead. PPF was designed exactly for that kind of horizon, with a minimum lock in of 15 years and the option to extend in blocks after that. If you keep putting money every year, the account becomes a quiet long-term pot that can support big goals like higher education for the kids or your own retirement. Because the interest is tax free and the product is backed by the government, you do not have to worry about reinvestment risk every two or three years the way you do with rolling FDs.
For a typical young family, PPF works best when you treat it as “untouchable” money. A fixed monthly transfer into PPF aligned with payday is often easier than trying to find a large lump sum at year end. Over 15 years, a consistent contribution at the current rate can grow to several times what you put in, simply because of uninterrupted compounding and the absence of yearly tax drag.
Where fixed deposits still help a young family
That does not mean fixed deposits should be ignored. FDs are far more flexible on time. You can lock money for a few months, a couple of years or longer and you can break the deposit if you really need the cash, usually with a small penalty. This makes FDs useful for near term goals that sit just a few years away, such as a home renovation, car replacement or building a buffer for possible job changes.
For parents, an FD can also double as a parking place for bonuses or windfalls that you plan to use in the next two to three years. Here, chasing the very highest rate from a small institution may not be necessary. Many families prefer the comfort of a large, familiar bank for these medium-term pots and accept a slightly lower return in exchange.
Why a mix usually works best for a 35-year-old with kids
Seen through the eyes of a 35-year-old with children, PPF and FDs are not rivals. They play different roles. PPF is better suited to long term, committed money where you want tax relief today and inflation beating, tax free compounding over a decade or more. Fixed deposits are better for money that you might realistically need within the next two to five years and where easy access matters more than squeezing out an extra half percent.
A simple way to think about it is this. Money you do not want to touch until the children are in college or you are close to 50 can lean more toward PPF. Money you might need for nearer expenses can sit in a ladder of fixed deposits with different maturities. For most young families, this combination creates a more comfortable balance between safety, access and growth than relying only on one product.
Frequently asked questions
Is PPF always better than a fixed deposit for a 35-year-old?
Not always. PPF usually wins on long term, post-tax returns, especially if you are in a higher tax slab and can stay invested for 15 years or more. Fixed deposits still work better for short- and medium-term needs where liquidity is important and the time frame is too short to justify locking money away.
What if FD rates rise sharply in the next few years?
If deposit rates move up a lot, fresh FDs will look more attractive for new money. Even then, interest from fixed deposits will be taxed, while PPF interest remains tax free. For long term goals, that tax advantage often keeps PPF competitive, even when FD headline rates are temporarily higher.
How should a 35-year-old split money between PPF and FDs?
There is no single rule, but many planners suggest using PPF as the base for very long-term goals and then putting a smaller portion into rolling FDs for the next two to five years of expenses. As your income grows, you can first try to fill the annual PPF limit, then increase the FD and other investments around it.
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