Top Children’s Funds to Invest Online in 2024

Children’s mutual funds offer parents a strategic avenue to invest in their child’s future and financial well-being. These specialised investment vehicles are designed to accumulate wealth over the long term, aiming to fund significant milestones such as education expenses or starting capital for entrepreneurial endeavours. By investing in childrens fund, parents can instil the habit of financial planning in their children from an early age, fostering a financially secure future.

Top 9 Children’s Funds to Invest in 2024

Here are the top children’s funds in India sorted according to their 5Y CAGR:

Name	AUM (Rs. in cr.)	3Y CAGR	5Y CAGR	Expense Ratio (%)
Tata Young Citizen Fund	339.36	17.54%	18.53%	2.16
ICICI Pru Child Care Fund-Gift Plan	1,205.19	20.29%	16.65%	1.30
Aditya Birla SL Bal Bhavishya Yojna	988.03	13.70%	13.57%	0.70
Axis Children's Gift Fund-No Lock in	811.61	10.56%	13.43%	1.09
Axis Children's Gift Fund-Compulsory Lock in	811.61	10.32%	13.24%	1.09
LIC MF Children's Gift Fund	15.29	13.03%	13.14%	1.03
SBI Magnum Children's Benefit Fund-Savings Plan	107.61	12.90%	12.30%	0.86
SBI Magnum Children's Benefit Fund-Investment Plan	1,930.39	32.43%	-	0.86
Union Children's Fund	42.54	-	-	0.80

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data on the list is from 13th May, 2024.  However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!

Overview of the Top Children’s Funds in India 2024

Tata Young Citizen Fund

The Tata Young Citizens Fund—Regular Plan must consistently allocate 65% of its assets to equity stocks. This children’s fund imposes a lock-in period of 5 years or until the child reaches maturity, whichever comes first. Flexi cap funds offer unrestricted flexibility to invest across various company sizes, guided by potential gains anticipated by the fund management team. It is one of the top mutual funds for children on our list!

ICICI Pru Child Care Fund-Gift Plan

The ICICI Prudential Child Care Gift Fund Direct Plan, a hybrid mutual fund from ICICI Prudential Mutual Fund, is managed by Lalit Kumar, Darshil Dedhia, and Rohit Lakhotia. With an AUM of ₹1,257.91 Crores, its latest NAV stands at ₹311.090. In the past year, the scheme has yielded returns of 39.50%, while over the last three years, it has shown a return of 74.04%. Since its launch, the scheme has achieved an impressive return of 377.06%. It is also one of our list’s best mutual fund child plans.. 

Aditya Birla SL Bal Bhavishya Yojna

Aditya Birla Sun Life Bal Bhavishya Yojna Direct – Growth, an equity mutual fund scheme by Aditya Birla Sun Life Mutual Fund, launched on an undisclosed date and currently managed by fund managers Atul Penkar and Harshil Suvarnkar, boasts an AUM of ₹988.03 Crores, with a latest NAV of ₹19.180. The scheme’s return performance over the past year stands at 30.41%, over the last three years at 46.42%, and since its inception, a notable 91.61%. It is one of the best mutual fund for child education in India. 

Axis Children’s Gift Fund-No Lock in

The Axis Children’s Gift Fund Direct – No Lock In Growth, a Hybrid mutual fund scheme by Axis Mutual Fund, debuted on an undisclosed date and is currently overseen by fund managers Ashish Naik, Devang Shah, Hardik Shah, and Jayesh Sundar. With an AUM of ₹811.61 Crores and a latest NAV of ₹25.433, this scheme has demonstrated robust returns: 14.12% in the past year, 34.27% over the last three years, and an impressive 153.90% since its inception. It is one of the best childrens investment funds on our list. 

Axis Children’s Gift Fund-Compulsory Lock in

Axis Children’s Gift Fund Direct – Compulsory Lock In Growth, a hybrid mutual fund from Axis Mutual Fund, was launched under the management of Ashish Naik, Devang Shah, Hardik Shah, and Jayesh Sundar. With an AUM of ₹811.61 Crores, its latest NAV stands at ₹25.004. Over the past year, the scheme has yielded returns of 14.12%, while over the last three years, it has shown a return of 34.27%. Since its inception, the scheme has recorded a remarkable growth of 149.64%.

LIC MF Children’s Gift Fund

LIC MF Children’s Gift Fund Direct-Growth, a hybrid mutual fund from LIC Mutual Fund, commenced on an undisclosed date. It is presently overseen by fund managers Karan Doshi and Pratik Harish Shroff. With assets under management (AUM) totaling ₹15.71 Crores, its latest declared NAV stands at ₹32.525. Over the past year, LIC MF Children’s Gift Fund Direct-Growth has demonstrated returns of 23.07%, while over the last three years, it has yielded 44.41%. Since its inception, the scheme has recorded an impressive return of 213.45%.

SBI Magnum Children’s Benefit Fund-Savings Plan

SBI Magnum Children’s Benefit Fund – Savings Plan, a hybrid mutual fund from SBI Mutual Fund, was launched on an unspecified date and is overseen by fund managers Rama Iyer Srinivasan and Rajeev Radhakrishnan. With an AUM of ₹109.84 Crores, its latest NAV stands at ₹103.452. Over the last year, the scheme has yielded returns of 17.52%, while over the past three years, it has shown returns of 43.91%. Since its inception, the scheme has demonstrated a remarkable return of 274.13%.

SBI Magnum Children’s Benefit Fund-Investment Plan

The SBI Magnum Children’s Benefit Fund – Investment Plan, a hybrid mutual fund from SBI Mutual Fund, was launched on an unspecified date. It is currently managed by fund managers Rama Iyer Srinivasan and Rajeev Radhakrishnan. With an AUM of ₹1,930.39 Crores, its latest NAV is ₹35.558. Over the past year, the scheme has returned 39.51%, over the last three years, it has returned 131.16%, and since its launch, it has returned 250.91%.

Union Children’s Fund

Union Children’s Fund, a scheme by Union Mutual Fund, was initiated on an unspecified date and is currently overseen by its fund managers Hardick Bora, Parijat Agrawal, and Sanjay Bembalkar. With an AUM of ₹44.99 Crores and a recent NAV of ₹10.600, the scheme’s return performance stands at 6.32% since its inception.

What is a Children’s Fund?

A Children’s Fund, a type of mutual fund tailored for child-related financial goals, offers a solution-oriented approach to combat the increasing expenses of education and other essentials. Typically, these funds invest in a mix of equities and debts, allowing investors to tailor their investments based on their risk tolerance and time horizon.

Characterised by a minimum lock-in period of 5 years, which can be extended until the child reaches adulthood, Children’s funds promote long-term investment by restricting withdrawals until maturity. This strategy shields investors from market volatility, enabling them to capitalize on greater returns by holding their investments through market fluctuations rather than liquidating during downturns.

How do Children’s Funds Work?

Child Fund India houses offer personalised investment options tailored to meet individual financial goals. These funds invest in both equity and debt portfolios, allowing investors to choose a mix based on their risk appetite and investment horizon. Childrens fund typically require a minimum lock-in period of 5 years, which may extend until the child reaches adulthood. Investors cannot withdraw funds before maturity, encouraging longer-term commitments. Early redemption incurs high penalties, typically 3% to 4% in India, incentivising investors to stay invested for longer durations. Longer investment periods enable funds to generate higher interest earnings and mitigate volatility risks for investors.

Purpose of Children’s Funds

A mutual fund for a child aims to provide financial resources for essential expenses like higher education, boarding, and relocation. These funds offer a secure portfolio, ensuring assured returns on investments.

Based on their financial needs, parents can choose a flexible lock-in period, ranging from 5 years to the child’s 18th birthday. This flexibility makes mutual funds a viable long-term investment option with tailored terms and conditions.

Children’s mutual funds balance security and returns through a hybrid portfolio of debt and equity instruments, delivering attractive returns while minimizing risks.

A high exit penalty in childrens fund in India discourages early withdrawals, helping the funds grow more interest over time. Fund houses typically charge a 4% penalty if the fund is liquidated before the minimum 5-year lock-in period.

Features of Children’s Funds

Here are some key features to keep in mind when considering children’s fund investments:

• Investment Objective: Childrens Funds aim to provide a stable investment option for long-term capital gains. While debt-focused funds offer steady returns with minimal risk, equity-linked funds may yield higher returns over the long run despite short-term fluctuations.
• Lock-in Period: Childrens Funds are locked for a minimum of 5 years or until the child reaches 18 years old, whichever occurs first.
• Exit Load and Expense Ratio: Investors should be aware of the annual expense ratio and exit load associated with Children’s Funds, which are incurred upon redeeming the investment.
• Documentation Requirements: In addition to standard mutual fund documentation, investing in Children’s Funds necessitates providing proof of the child’s age, proof of relationship, and other relevant documents.

Factors to Consider While Investing in Childrens Funds

Investing in children’s mutual funds can be a strategic financial move for securing your child’s future. Here are some essential factors to consider before making your investment:

• Investment Objective: Determine the purpose of the investment, whether it’s for your child’s education, marriage, or future financial security.
• Risk Appetite: Assess your risk tolerance and choose funds that align with your comfort level. Children’s funds typically come with varying levels of risk, so it’s crucial to select one that suits your risk profile.
• Fund Performance: Evaluate the historical performance of the mutual funds you’re considering. Look for consistent returns over different time periods to gauge the fund’s stability and growth potential.
• Expense Ratio: Consider the fund’s expense ratio, which represents the annual fees charged by the mutual fund company. Lower expense ratios translate to higher returns for investors.
• Investment Horizon: Determine the time horizon for your investment. Children’s mutual funds are typically long-term investments, so choose funds that match your investment timeline.
• Fund Manager’s Track Record: Research the fund manager’s expertise and track record in managing similar funds. A skilled and experienced fund manager can significantly impact the fund’s performance.
• Portfolio Diversification: To mitigate risk, ensure that the fund offers a well-diversified portfolio across different asset classes. A diversified portfolio can provide stability during market fluctuations.
• Exit Strategy: Understand the exit options available with the fund, such as redemption rules and penalties. It’s essential to have a clear exit strategy in place to align with your investment goals.

Who Should Invest in Children’s Funds?

Children’s Fund helps parents and guardians save money for their children while securing significant investment returns. It invests in low-risk assets like bonds, real estate, and commodities alongside high-risk options such as equity-linked stocks. Beyond financial support, Children’s Fund offers additional benefits like education assistance and scholarships for eligible children graduating from high school or college.

Ideal investors for Children’s Fund have:

• Long-term Investment Horizon: Suitable for those planning to invest for 5 to 15 years or longer.
• Capital Gains & Returns: Designed for investors seeking good long-term returns. Assessing debt versus equity options and past performance helps in setting realistic expectations.
• Risk Profile: Best for those with a moderate risk tolerance who can handle short-term market fluctuations. Debt options are available for those preferring safer investments.
• Asset Allocation: Investors can choose equity funds with higher risk and potential returns, or debt-focused funds offering stability and lower risk.

How to Choose the Best Childrens Funds?

To choose the best children’s mutual funds India, start by reviewing the fund’s investment objectives to ensure they align with long-term financial goals like education and savings. Examine the fund’s performance history for consistent returns over the last 5 to 10 years. Evaluate the risk levels associated with the fund, aiming for a balanced risk profile to safeguard future financial needs. Research the fund manager’s expertise and track record to ensure experienced and reliable management. Analyse the expense ratios to keep investment costs low and enhance net returns. Check the childrens fund’s asset allocation to ensure a diversified portfolio that balances equities, debt, and other instruments to mitigate risks. Finally, consider any tax benefits the fund may offer under relevant sections of the Income Tax Act to boost overall returns.

How to Invest in Children’s Funds?

Investing in childrens fund can secure a child’s financial future by providing long-term growth and savings for education, marriage, or other significant milestones. Here’s a step-by-step guide on how to invest in children’s funds:

Research and Compare Funds

Research various childrens fund available in the market. Compare their past performance, investment strategy, fund manager’s track record, and expense ratios.

Understand Investment Objectives

Choose a childrens fund that aligns with your financial goals for your child, whether it’s for higher education, marriage, or creating a financial safety net.

Check Fund Type

Determine whether the fund is an equity-oriented or debt-oriented scheme. Equity funds typically offer higher returns but come with higher risks, whereas debt funds provide more stable but lower returns.

Evaluate Lock-in Periods

Childrens fund often come with a lock-in period. Ensure that the lock-in period aligns with your investment horizon and your child’s financial goals.

Assess Risk and Returns

Review the fund’s historical returns and volatility. Consider the fund’s risk level and ensure it matches your risk tolerance and the time frame for your child’s financial goals.

SIP or Lump Sum

Decide whether to invest through a Systematic Investment Plan (SIP) or a lump sum investment. SIP for children allows for regular contributions, reducing the impact of market volatility, while a lump sum can benefit from market upswings if timed correctly.

Documentation and KYC

Complete the Know Your Customer (KYC) formalities and required documentation. This is a mandatory step for mutual fund investments in India.

Monitor and Review

Monitor the childrens fund’s performance regularly and review your investment strategy periodically. Adjust your investments as needed to stay aligned with your financial goals.

How do Children’s Funds Generate Returns?

Children’s mutual funds generate returns by investing in a diversified portfolio of stocks, bonds, and other securities. Fund managers select investments that align with the fund’s objectives, such as long-term growth or income generation. These investments are spread across various sectors to minimise risk and capitalise on market opportunities.

• Equity Investments: A significant portion of children’s funds is often allocated to equities, which have the potential for high returns. These stocks are chosen based on their growth potential and stability.
• Fixed-Income Securities: Childrens funds invest in bonds and other fixed-income securities to balance the higher risk of equities. These provide steady interest income and help stabilise the portfolio.
• Dividend Reinvestment: Many children’s funds reinvest dividends from their equity holdings, which helps compound returns over time.
• Market Analysis and Strategy: Fund managers continuously analyse market trends and adjust the investment strategy to optimise returns while managing risk.

Benefits of Investing in Children’s Funds

Children’s Funds offer several benefits, including:

1. Childrens Fund provide a tailored investment option for parents or guardians to secure their child’s future.
2. These funds are available in both debt-based and equity-based schemes, allowing investors to make informed decisions about the type of fund they choose.
3. Investors enjoy tax benefits and the advantage of indexation, reducing the taxable amount.
4. Parents can feel reassured about their child’s future, knowing there will be sufficient financial support to meet their goals.
5. Parents of children with disabilities receive an additional tax benefit on the childrens fund, including an annual exemption of INR 1500 per child on interest income.

Risks of Investing in Children’s Funds

Children’s Funds focus on long-term investments, allocating assets in equity and debt based on the chosen scheme. Childrens fund don’t guarantee returns and are influenced by market conditions. Their equity exposure makes them moderately to highly risky, so consider this when adding them to your portfolio.

Children’s Fund vs Sukanya Samriddhi Yojana

Here is a table of comparison between children’s funds and Sukanya Samriddhi Yojana Scheme:

Aspects of Comparison	Childrens Fund	Sukanya Samriddhi Yojana
Eligibility	Can be for both girls and boys.	Exclusively for girls.
Age Limit	No minimum age; the maximum age is 18 years	The minimum age is 3 months; The maximum age is 10 years
Number of Accounts	No limit on the number of accounts	Maximum of two accounts per family with two or more daughters.
Account Management	Managed by parents or legal guardians.	Managed by parents or guardians until the girl turns 18, after which she can manage it.
Returns	Variable, dependent on market performance.	Fixed, currently at 7.6% per annum.
Investment Limit:	No limit.	Up to Rs. 1.5 lakh per year.
Risk	Higher risk due to market fluctuations.	Risk-free, backed by sovereign guarantees.
Lock-in Period	Typically a minimum of 5 years or until the child turns 18, whichever comes first.	21 years from the account opening date.
Premature Withdrawal	Allowed, but exit loads can be as high as 4%.	Allowed in specific cases like the child’s death, loss of citizenship, or severe financial hardship.
Maintenance Cost	Annual expense ratio fee by the Asset Management Company (AMC).	No maintenance cost.

Taxability of Childrens Fund

Investing in a Children’s Fund offers tax benefits, allowing deductions up to INR 1.5 lakhs under Section 80C of the Income Tax Act, 1961. However, maturity gains are taxable. The government taxes gains exceeding INR 1 lakh in a financial year at 10% for equity funds. For debt funds, it taxes capital gains at 20% with indexation.

Exit Load on Childrens Fund in India

When choosing a mutual fund for your children, it’s crucial to consider the associated exit load. Mutual fund companies often impose high exit loads or penalties to encourage long-term investments, aiming to retain parents as customers for extended periods.

Previously, mutual funds included entry loads, but after their ban, fund houses typically charge around a 1% exit load for redemptions made within the first year. For child mutual fund plans, the exit load can reach up to 4%, and investors may need to stay invested for a minimum of five years. Some plans even charge an exit load if the investor redeems the fund after seven years.

These exit loads promote long-term investment, enabling investors to see significant growth in their funds potentially.

To Wrap It Up…

Sometimes, financial constraints make saving for your child’s future hard. However, even small monthly SIPs can help achieve this goal. Investing in mutual funds for your child is essential to secure the best education for your child. This investment strategy relieves parents of financial worries and ensures a quality life for their children.

Most Popular Mutual Funds:

As an investor to have a diversified mutual funds portfolio, you might also like to know more about these different types of funds for investing –

Large Cap Mutual Funds	Mutual Fund Bulk Deals	SBI Mutual Funds for SIP	SBI MF for Long Term SIP	Sectoral Mutual Funds	Short Term Mutual Funds	Tax Saving Mutual Funds	Mid Cap Mutual Funds
Small Cap Mutual Funds	Pharma Mutual Funds	80c Mutual Funds	1 Year Mutual Funds	International Mutual Funds	Tata Mutual Funds	Mutual Fund Portfolio	Best Mutual Funds
High Risk Mutual Funds	Micro Cap Mutual Funds	AMCs	MNC Mutual Funds	Equity Mutual Funds	Overnight Funds	ICICI Pru Mutual Funds	HDFC Mutual Funds
Best Investment Plans	Fixed Income Mutual Funds	Penny Stock Mutual Funds	Retirement Mutual Funds	Floater Rate Funds	Aggressive Hybrid Funds	Multi Asset Allocation Funds	Children’s Funds
Medium Duration Funds	Debt Funds	Corporate Bonds	Ultra Short Term Funds	Value Funds	Contra Funds	Focused Funds	Funds of Funds
Money Market Funds	Arbitrage Funds	Gold Mutual Funds	Books on Mutual Funds	Best Mutual Funds for SIP	SBI Mutual Funds	Low Risk Mutual Funds	Dividend Paying Funds
Long Term Mutual Funds	Banking Mutual Funds	Gilt Funds	Mutual Funds for 10 Years	Monthly Income Mutual Funds	Nifty 50 Index Funds	Lumpsum Investment Funds	Blue Chip Mutual Funds
Low Expense Ratio Funds

Frequently Asked Questions(FAQs) on Children’s Funds