Child-Oriented Mutual Funds: Should You Invest For Your Child's Future?

One of the most significant financial goals for parents is to save and invest for their children's education and marriage. Many mutual funds, insurance firms, and banks offer their own versions of kid investing programmes, recognising the relevance of these objectives. The Child-oriented Mutual Fund Plan is one of them. A solution-oriented children's fund, as defined by market regulator SEBI, is an open-ended fund for investing in children with a lock-in period of at least 5 years or until the kid reaches the age of majority, whichever comes first.

Why Should You Invest In Mutual Fund Children Investment Plans?

One of the most important financial goals for parents is to plan for their child's future job. It is widely believed that parents should begin preparing for their children's education as early as possible. Early planning and investment strategies may frequently assist parents in providing a wider selection of educational alternatives for their children.

Balanced/hybrid funds invest in both stock and debt securities, as do the Mutual Fund Child Investment plans. Technically they are also mutual fund. Some funds, such as HDFC Children's Gift Fund, are more adventurous and invest a bigger portion of their assets in equities rather than debt, whilst others, such as HDFC Children's Gift Fund - Savings Plan, are more conservative and invest primarily in safer debt instruments.
These plans are an excellent way to build a sizable savings account for one's children. Its tax-free status and guaranteed yield promote wealth creation, but the high penalty for early withdrawals deters investors from selling the asset before it matures.

Mutual Fund Children Investment Plan

There are now seven mutual fund providers offering nine kid investing funds.

Children Plan Mutual Funds	Fund Size
ICICI Prudential Child Care Fund - Direct Plan - Gift Plan	₹ 834.33 Cr
Tata Young Citizens Fund - Direct Plan - Growth	₹ 254.94 Cr
Axis Childrens Gift Fund - No Lock-in - Direct Plan - Growth	₹ 716.41 Cr
Axis Childrens Gift Fund - Compulsory Lock-in - Direct Plan - Growth	₹ 716.41 Cr
HDFC Childrens Gift Fund - Direct Plan	₹ 5368.14 Cr
UTI CCF- Investment Plan - Direct Plan - Growth	₹ 592.34 Cr
SBI Magnum Childrens Benefit Fund - Investment Plan - Direct Plan - Growth	₹ 421.89 Cr
LIC MF Childrens Fund - Direct Plan	₹ 13.88 Cr
SBI Magnum Childrens Benefit Fund - Savings Plan - Direct Plan - Growth	₹ 85.72 Cr
Aditya Birla Sun Life Bal Bhavishya Yojna - Direct Plan - Growth	₹ 521.03 Cr

Things You Know

Every mutual fund institution permits the purchase of any plan in the name of a minor child under the age of 18. The investment in the child's plans must be made in the child's name.

This requires that the child will require more KYC. KYC must also be completed after the child reaches the age of 18. This isn't a particularly seamless transition. There is no upper age limit or limit on the amount of money that can be invested.

In such a folio, the child must be the first and only possessor. This folio will not allow any joint holders. A parent (father or mother) or a court-appointed legal guardian should be listed as the guardian in the folio.

The Child Plans' investment strategy and returns are similar to those of ordinary mutual funds in the same category. Some kid plans allow you to defer withdrawals until the child reaches the age of 18. Depending on your unique behaviour and situation, this might be beneficial or detrimental.