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Have you saved enough for your child’s future financial needs?

By Nivesh Gyan   11 July

Category: Save for Children

Mutual Funds Plan for children is the answer to secure your kid’s financial future

Every parent aspires to offer the best to their children – sound education, a decent lifestyle and most importantly, adequate financial security for them to pursue their dreams. But in order to fulfil these desires, it is necessary that planning and regular investments are done early on. And what better than Mutual Funds to achieve these objectives?

What are Mutual Funds Plans for children?

Mutual Funds Plans for children are the mutual fund schemes specially designed keeping in the mind the long term financial needs of a child.

How do Mutual Funds Plans for children Work?

  • They invest proportionately in both equity and debt instruments to maintain a balance between growth and regular income, depending on the scheme. These are mostly hybrid funds that seeks to generate income by investing in debt, money market instruments and equity and equity related securities.
  • They are ideal for investors who have a long-term investment horizon. With the returns being inflation adjusted in the long run, the funds are able to beat the soaring higher education costs and other expenses and deliver effectively on their objective.
  • Such schemes usually invest up to 75% of their corpus in fixed income securities, money market instruments, securitized debt and cash, with G-Sec and corporate securities comprising a major part of the debt component. The balance of up to 25% is invested in equity which seeks to provide potential capital appreciation.
  • Since investing for child's future is considered a long-term investment, most of these schemes come with a high exit load to discourage early redemption.
  • SIPs or Systematic Investment Plans are the ideal way to go about investments in Child Plan Mutual Funds since a small amount overtime can accumulate into greater returns.

Snapshot of some Mutual Funds Plans for children and their returns

Scheme Name Equity / Debt Exposure Exit Load (%)
SBI Magnum Children’s Benefit Plan 24.73% / 75.27%
  • 3% on or before 1Y
  • 2% after 1Y but on or before 2Y
  • 1% after 2Y but on or before 3Y
  • Nil after 3Y
UTI CC Balanced Plan 39.49% / 60.41%
  • 3% on or before 1Y
  • 2% after 1Y but on or before 2Y
  • 1% after 2Y but on or before 3Y
  • Nil after 3Y
ICICI Pru Child Care Plan 24.58% / 75.42%
  • 3% on or before 1Y
  • 2% after 1Y but on or before 2Y
  • 1% after 2Y but on or before 3Y
  • Nil after 3Y
Tata Young Citizens Fund 48.90% / 51.03%
  • 3% on or before 1Y
  • 2% after 1Y but on or before 2Y
  • 1% after 2Y but on or before 3Y
  • Nil after 3Y

A word of caution!

While investing in a mutual fund plan for child, one is strictly advised to ignore short-term market fluctuations and focus on long-term returns.