Childrens Funds

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What are Children's Funds?

Children’s Fund or Child Gifting Mutual Fund is an open-ended scheme designed primarily for child-specific needs like educational expenses, relocation, higher studies, healthcare, marriage, etc. These funds come with a 5 year mandatory lock-in period or until the child becomes an adult, whichever is earlier. View More

Just like any other mutual fund, the amount invested in this scheme is utilized by the fund manager to buy stocks, bonds, debt, money instruments, and other financial assets, which can earn good returns over time. These returns are passed on to the investor as dividends they receive at regular intervals while providing long-term capital gains.

Depending on the investment horizon and goal, investors can choose from among two Children’s Funds:

  • Equity-Focused: Which invests a higher allocation of funds (60% or more) in equity-linked assets that offer investors higher returns with a higher associated risk
  • Debt-Focused: Which are focused on debt assets (60% or more) that provide investors a higher security

Children’s Gift Mutual Fund allows the parents to create a separate fund dedicated to this child’s requirements, enabling them to keep their expenses and create a dedicated fund for their child’s needs. The child can receive the amount accumulated when they turn 18 and can also be utilized for their needs.

Who should invest in Children's Funds?

Children’s Fund is focused on helping parents and guardians save money for their children and gain sizeable returns from their investments. Thus, it invests in low-risk opportunities like bonds, real estate, commodities, and some high-risk ones like equity-linked stocks. View More

In addition to providing financial support, the Children’s Fund can provide additional benefits like education assistance and scholarships when the eligible child graduates from college or high school.

If you are planning to consider investing in the Children’s Fund, it is ideally suited for those who have the following:

  • Long-term Investment Horizon: The investment horizon for this fund should be at least 5 years up to 15 years or longer
  • Capital Gains & Returns: Children’s Funds are ideal for those who want to invest in a long-term instrument that offers good returns. The investor should consider debt Vs. equity and look at past records as an indicator of what to expect in the long run. The higher the horizon, the better the chances of getting good returns, beating market volatility, expenses, and other costs.
  • Risk Profile: The risk profile of someone who wants to invest in a Children’s Fund should be moderate, meaning they should not worry about fluctuations or any volatility in the short term. Investors can opt for debt options if they want a safer option.
  • Asset Allocation: Given the risk, investors can choose an equity fund with a higher allocation in equity-linked schemes and the changes of giving a higher return but with equivalent risk. Similarly, the investor can also go for debt-focused funds that offer stable returns and lower risk.

Features of Children’s Funds

Some of the features of Children’s Fund are:

  • Objective of Fund: All Children’s Funds are dedicated to the goal of providing a stable investment option for investors with the ability to give long-term capital gains. If you go for debt-focused funds, you may need to bear a small risk still but can be sure to get stable returns, while equity-linked funds can have a higher fluctuation in the short-term but with the promise of sizeable returns in the long run.

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  • Lock-in period: Children’s funds are locked for at least 5 years or till the child turns 18, whichever happens first.
  • Exit load and Expense Ratio: Children’s funds come with an expense ratio that is annually charged while the exit load is paid when redeeming the fund.
  • Documentation: In addition to basic documentation required for investing in a mutual fund, Children’s Funds also require you to provide documentation that includes proof of age, proof of relationship, and others.

Taxability of Children’s Funds

Children’s Fund comes with tax benefits for the investor and qualifies for tax deduction up to INR 1.5 lakhs under Section 80C of the Income Tax Act, 1961. The maturity gains, however, are taxable as per regular tax laws, and for equity funds, any gains above INR 1 lakh in a financial year are taxed at 10%. Meanwhile, for debt funds, capital gains are taxable up to 20% with indexation.

Risks involved in Children’s Funds

Children’s Funds are geared for long-term investment horizons and invest in equity and debt instruments depending on different asset allocations depending on the type of scheme chosen. However, this mutual fund does not guarantee returns and is susceptible to market conditions. The fluctuations and exposure to equity-linked schemes make it a moderate to high risk and should be considered in your portfolio accordingly.

Advantages of Children’s Funds

Some of the benefits of Children’s Funds include:

  • A great investment option for parents or guardians who are looking for a tailor-made fund that can secure their child’s future
  • A child-specific scheme that is debt-based and equity-based, giving investors the option to make an informed decision on the type of fund to choose from
  • The fund comes with tax benefits for the investor and provides the benefit of indexation to minimize the amount of tax imposed
  • It is ideal for parents as they do not have to worry about the child’s future, and the children can attain their goals with sufficient financial back-up as required
  • For parents of children with disability, the fund also gives an additional tax benefit, and parents can claim an annual exemption of INR 1500 per child on annual interest income

Who Are These Funds Suited For?

Children’s Mutual Funds are best suited for those who want to secure their child’s future and create an investment fund that caters to this requirement. Children’s fund is exempt from taxes, and thus parents looking for tax benefits can also consider this investment option. View More

Children’s Funds are tailor-made and flexible, as investors can choose between equity-focused and debt-focused schemes, making them ideal for long-term holding. However, investors need also to be sure that these funds come with a minimum lock-in period of 5 years or till the time the child turns 18, whichever happens, earlier. If the investor wants to withdraw any funds from the scheme before the lock-in period, premature withdrawals are a considerable penalty.

Popular Childrens Funds

  • Fund Name
  • Min SIP Investment Amt
  • AUM (Cr.)
  • 3Y Return

UTI-Children’s Equity Fund – Direct Growth is an Childrens scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Vetri Subramaniam. With an impressive AUM of ₹1,010 Crores, this scheme's latest NAV is ₹89.9821 as of 14-06-24.

UTI-Children’s Equity Fund – Direct Growth scheme has delivered a return performance of 34.6% in the last 1 year, 16.6% in the last 3 years, and an 15% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Childrens funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹1,010
  • 3Y Return
  • 34.6%

Tata Young Citizens Fund – Direct is an Childrens scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Amey Sathe. With an impressive AUM of ₹336 Crores, this scheme's latest NAV is ₹64.9793 as of 14-06-24.

Tata Young Citizens Fund – Direct scheme has delivered a return performance of 30.7% in the last 1 year, 17.2% in the last 3 years, and an 13.7% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in Childrens funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹336
  • 3Y Return
  • 30.7%

HDFC Children’s Gift Fund – Direct Growth is an Childrens scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Chirag Setalvad. With an impressive AUM of ₹9,018 Crores, this scheme's latest NAV is ₹306.097 as of 14-06-24.

HDFC Children’s Gift Fund – Direct Growth scheme has delivered a return performance of 29.1% in the last 1 year, 18.8% in the last 3 years, and an 17% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Childrens funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹9,018
  • 3Y Return
  • 29.1%

AXIS Children’s Gift Fund – Lock in – Dir Growth is an Childrens scheme that was launched on 08-12-15 and is currently under the management of our experienced fund manager Ashish Naik. With an impressive AUM of ₹822 Crores, this scheme's latest NAV is ₹26.8553 as of 14-06-24.

AXIS Children’s Gift Fund – Lock in – Dir Growth scheme has delivered a return performance of 19.8% in the last 1 year, 10.8% in the last 3 years, and an 12.3% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Childrens funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹822
  • 3Y Return
  • 19.8%

ICICI Pru Child Care Fund-Gift Plan – Direct is an Childrens scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Manish Banthia. With an impressive AUM of ₹1,267 Crores, this scheme's latest NAV is ₹337.13 as of 14-06-24.

ICICI Pru Child Care Fund-Gift Plan – Direct scheme has delivered a return performance of 44.6% in the last 1 year, 21.5% in the last 3 years, and an 15.4% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Childrens funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹1,267
  • 3Y Return
  • 44.6%

Aditya Birla SL Bal Bhavishya Yojna – Dir Growth is an Childrens scheme that was launched on 11-02-19 and is currently under the management of our experienced fund manager Atul Penkar. With an impressive AUM of ₹994 Crores, this scheme's latest NAV is ₹20.96 as of 14-06-24.

Aditya Birla SL Bal Bhavishya Yojna – Dir Growth scheme has delivered a return performance of 34.7% in the last 1 year, 14.7% in the last 3 years, and an 14.9% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Childrens funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹994
  • 3Y Return
  • 34.7%

LIC MF Children’s Fund – Direct is an Childrens scheme that was launched on 16-01-13 and is currently under the management of our experienced fund manager Karan Desai. With an impressive AUM of ₹15 Crores, this scheme's latest NAV is ₹35.5242 as of 14-06-24.

LIC MF Children’s Fund – Direct scheme has delivered a return performance of 29.4% in the last 1 year, 14% in the last 3 years, and an 11.3% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Childrens funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹15
  • 3Y Return
  • 29.4%

SBI Magnum Children’s Benefit Fund – IP – Dir Growth is an Childrens scheme that was launched on 29-09-20 and is currently under the management of our experienced fund manager R Srinivasan. With an impressive AUM of ₹2,023 Crores, this scheme's latest NAV is ₹38.1916 as of 14-06-24.

SBI Magnum Children’s Benefit Fund – IP – Dir Growth scheme has delivered a return performance of 39.8% in the last 1 year, 32% in the last 3 years, and an 43.5% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Childrens funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹2,023
  • 3Y Return
  • 39.8%

Frequently Asked Questions

What does the Children’s Fund refer to?

A Children’s Fund or Children’s Gift Mutual Fund is a scheme that offers investors the advantage of long-term gains and is ideal for creating a fund for your children that can help in their future educational needs, higher studies, marriage expenses, and other requirements. Children Funds are either Hybrid-Debt or Hybrid Equity schemes, depending on the exposure of the assets. 

Can I gift a mutual fund to my child?

Yes, many fund houses offer dedicated Children’s Mutual Funds, which are devoted explicitly to child-related requirements like a child’s schooling, higher education, marriage, or healthcare. The parents or guardians can invest on behalf of the child and gift the mutual funds to their children. 

Can I invest in a mutual fund for my child?

Yes, you can invest in a children’s mutual fund for your child, provided that you meet the eligibility criteria by your AMC.

What is the lock-in period for Children’s Funds?

Yes. Children’s Fund comes with a mandatory lock-in period of 5 years or until the child becomes an adult. It can also be designed to cover different requirements like marriage or child education.

Is there any requirement for investing in Children’s Funds?

Yes. The parent or guardian must provide the minor’s age proof to invest in the children’s mutual funds. It can include documents like a Passport, Aadhaar Card, or Birth Certificate, which can present age proof and confirm the date of birth.

Additionally, the investor must also submit proof of relationship with the child, which includes a Passport or Birth Certificate mentioning the parent’s name. A legal guardian can also invest in the child’s name by providing appropriate documents. 

Which is better - Child plan or the Children’s Mutual Fund?

Both child plans and Children’s mutual funds offer several benefits depending on the needs. While child plans are considered risk-free and suitable interest, Children’s Mutual Funds can be volatile but have the chance of providing a higher return in the long-term horizon. 

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