Child Mutual Fund Plans in India offer a smart way to save for your child's future, providing financial security for education and other important life events.
What are Child Mutual Fund Plans?
Child Mutual Fund plans are open-ended mutual funds schemes that are designed to help parents save for their child’s future financial needs. These plans typically have a lock-in period of five years or until your children reach the age of majority, whichever is earlier. They offer a variety of investing objectives, including equity, debt, and hybrid funds, to suit different risk appetites and investment horizons.
One of the key benefits of child mutual fund plans is that they allow parents to invest in a disciplined and goal-oriented manner. Parents can choose to invest a fixed amount every month through a Systematic Investment Plan (SIP), or they can make lump sum investments. This helps to build a corpus over time, which can be used to fund the child’s future needs such as higher education, marriage, or starting a business.
Another advantage of child mutual fund plans is that they offer the potential for higher returns than traditional savings options such as bank deposits. However, it is important to note that mutual funds are subject to market risks, and there is no guarantee of returns.
Child Mutual Fund Plans in India
Child Mutual Fund Plans in India are specialised investment vehicles tailored to secure the financial future of children. These plans are offered by reputable financial institutions such as ICICI Prudential Child Care, HDFC Children’s Gift Fund, TATA Young Citizens Fund, Axis Children’s Gift Fund, and SBI Magnum Childrens, among others.
They provide parents and guardians with an opportunity to invest for their child’s education, marriage, or other significant life events. These plans typically come with a lock-in period, encouraging long-term investments, and offer diversified portfolios through mutual funds to manage risk and aim for capital growth. Additionally, individuals seeking the best child mutual fund options can explore various offerings in the market to select the one that aligns with their financial goals and risk tolerance.
Consider Before Investing in Mutual Funds for Children
- Assess your own risk tolerance as it will influence the choice of investment options within the fund
- Determine the time horizon for the child’s financial needs, whether it’s for education, marriage, or other goals, to select appropriate funds with the right investment horizon
- Understand the specific investment goals, such as the required corpus, to set clear objectives
- Explore and choose mutual funds that align with your investment goals and risk tolerance
- Evaluate the expense ratio of the mutual fund to ensure cost-effectiveness and lower fees
- Be aware of any additional fees and charges associated with the mutual fund to avoid unexpected costs
- Take the time to thoroughly consider these factors before making any investment decisions for your child’s financial future.
Details of the Best Mutual Funds for Children in India
Here is a table of the best mutual funds for children in India, based on the entities you provided, as of 6 November 2023:
| Fund | Fund Type | Risk Profile | Minimum Investment Amount | SIP Start Amount | Expense Ratio | 5-Year CAGR |
| Tata Young Citizen Fund | Balanced | High | ₹500 | ₹150 | 1.55% | 15.46% |
| ICICI Pru Child Care Fund-Gift Plan | Balanced | High | ₹500 | ₹500 | 1.59% | 14.83% |
| Aditya Birla SL Bal Bhavishya Yojna | Balanced | High | ₹500 | ₹500 | 1.55% | 14.69% |
| LIC MF Children’s Gift Fund | Balanced | High | ₹500 | ₹500 | 1.54% | 14.56% |
| Axis Children’s Gift Fund-No Lock in | Balanced | High | ₹500 | ₹500 | 1.57% | 14.43% |
| Kotak Children’s Gift Fund | Balanced | High | ₹500 | ₹500 | 1.61% | 14.29% |
| DSP BlackRock Children’s Gift Fund | Balanced | High | ₹500 | ₹500 | 1.63% | 14.15% |
| Disclaimer: The above mentioned list is just for informational purposes and does not suggest or support investing in Mutual funds. Remember, mutual funds are subject to market risks. It’s paramount to consult investment experts before making investments. Vakilsearch does not endorse and does not recommend making investments to the readers. |
Benefits of Child Mutual Fund Plans
- Higher Returns Potential : Child mutual fund plans invest in a mix of equity and debt securities, with a focus on equity. This means that they have the potential to generate higher returns over the long term
- Long-term Wealth Creation: Child mutual fund plans are typically long-term investments. This means that investors have the potential to benefit from the power of compounding, which can help to grow their wealth significantly over time
- Flexibility: Child mutual fund plans offer a great deal of flexibility. Investors can choose to invest regularly through a SIP or make lump sum investments. They can also withdraw money from their child’s mutual fund account as needed
- Tax Benefits: Investments in child mutual fund plans are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. This means that investors can claim a deduction of up to ₹1.5 lakh on their investments in child mutual fund plans every year
- Goal-based Investing: Child mutual fund plans can help investors to achieve their financial goals for their children. For example, investors can use child mutual fund plans to save for their child’s education, marriage, or other financial needs.
Limitations of Investing in Children’s Funds
- Once funds are invested, the child typically gains control at a certain age, which may not align with their financial maturity
- Children’s funds often have restrictions on how and when the money can be used, limiting flexibility for immediate needs or other investments
- Like any limited investment options, children’s funds can be subject to market fluctuations, which may impact the overall return on investment
- The tax treatment of children’s funds varies by country, and it’s essential to understand the tax implications and benefits associated with such investments
- Over time, the purchasing power of the invested funds may be eroded by inflation, especially if the returns do not outpace inflation
- Funds invested in a children’s account may miss out on potential growth in other investments with higher returns
- Children’s funds may not specifically address the growing costs of education, which can be a significant financial burden
- Managing children’s funds can sometimes lead to family conflicts or misunderstandings about who controls and benefits from the funds
- Over-reliance on a children’s fund can deter financial independence and fiscal responsibility in the child.
Who Should Invest in Children’s Funds?
- Parents and grandparents looking to secure a child’s financial future
- Those with long-term financial goals for education or major life events
- Individuals with a disciplined approach to saving and investing
- Those seeking potential tax advantages in some regions
- People willing to accept some limitations for the sake of financial planning.
Conclusion
Investing in children’s funds is a strategic choice for parents and guardians committed to securing their child’s financial future. It’s ideal for those with long-term goals, disciplined saving habits, and a willingness to navigate the limitations. Ultimately, these funds offer a way to plan for a child’s key life events while potentially enjoying tax benefits in certain regions. Resolve your queries through Vakilsearch top financial experts.
FAQs On Child Mutual Fund Plans in India
Which is the best SIP for children?
The choice of the best Systematic Investment Plan (SIP) for children depends on your specific financial goals and risk tolerance. Popular options include HDFC Children's Gift Fund and ICICI Prudential Child Care Fund. It's essential to assess your child's needs and consult a financial advisor for tailored recommendations.
Can I open a mutual fund for my child in India?
Yes, you can open a mutual fund for your child in India through options like a Children's Mutual Fund or a minor account with a guardian. You can start investing in a child's name with proper documentation and the child's PAN card. Consult your chosen mutual fund company for specific procedures.
How to invest in MF for kids?
To invest in mutual funds for kids, you'll need to follow these steps: choose a suitable mutual fund, complete the required documentation with the child's name and PAN card, designate a guardian, and make investments either through a lump sum or a SIP. Regularly monitor the investments to ensure they align with your child's financial goals.
Can I open SIP for my child?
Yes, you can open a Systematic Investment Plan (SIP) for your child's future. You'll need to select a mutual fund with an option for a minor account, provide the child's details and PAN card, and designate yourself as the guardian. This allows you to invest systematically on their behalf.
How do I start SIP for my son?
Starting a SIP for your son involves selecting a suitable mutual fund, completing the necessary paperwork in his name, and designating yourself as the guardian. You can initiate the SIP by providing the initial investment amount and setting up a systematic investment plan schedule according to your financial goals.
Are mutual funds good for kids?
Mutual funds can be a good investment choice for children, offering potential long-term growth and financial security. They allow you to plan for a child's future needs, such as education or major life events. However, it's crucial to choose the right funds, assess risk, and ensure they align with your specific goals and time horizon. Consulting a financial advisor can help in making informed decisions.
Also, Read:
