Imagine you plant a tiny seed today. You water it, give it sunlight, and take care of it every day. Over the years, it grows into a big, strong tree that gives you sweet fruits, cool shade, and even a treehouse to play in.
That’s what a Children’s Mutual Fund does — it’s like planting a money tree for your child. You start early and keep adding small amounts regularly. With time and care (thanks to something called compounding, your money grows and grows. So by the time your child wants to go to college, learn music, travel the world, or start something big — this tree will have grown enough to support those dreams. The earlier you plant it, the bigger it grows.
What are Children's Mutual Funds?
Children's Mutual Funds are investment plans specifically crafted to help you as a parent to save for your child's future needs. These funds fall under the category of 'solution-oriented funds' and are tailored to meet long-term financial goals such as funding education or major life events. Unlike traditional savings avenues, Children's Mutual Funds encompass investments in a diversified portfolio of stocks and bonds, aiming for long-term growth that stays ahead of inflation.
Features of Children's Mutual Funds
| Feature |
Description |
| Goal-oriented investment |
Specifically designed to help you save for your child’s future needs like education, hobbies, wedding etc. |
| Lock-in period |
Often comes with a lock-in period (e.g., 5 years or till your child turns 18), encouraging long-term saving. |
| Equity and debt options |
Funds will be invested in stocks (for growth) and bonds (for stability), depending on the risk profile. |
| Professional fund management |
Managed by experienced professionals who aim to maximise returns while managing risk. |
| Flexible investment modes |
Allows lump-sum or SIP (Systematic Investment Plan) contributions. |
| Withdrawal restrictions |
Designed to prevent premature withdrawals, helping preserve funds for your child’s goals. |
| Risk level |
Varies based on the fund type—Equity Funds have higher risk and returns, Debt Funds are stable. |
How do Children's Mutual Funds work?
These funds operate by investing your contributions in a mix of equity and debt instruments. The allocation between these asset classes may vary depending on the fund's strategy and your risk appetite. Most Children's Mutual Funds maintain a balanced approach to provide a sweet spot between growth potential and stability. Since children have time on their side, these funds capitalise on the power of compounding, potentially turning modest monthly contributions into significant sums over extended periods.
Benefits of investing in Children's Mutual Funds
- Encourages consistent investing towards your child’s future, turning long-term planning into a regular habit.
- Acts as a financial cushion in case of emergencies or unexpected life events, ensuring your child's plans aren't disrupted.
- Knowing there's a dedicated fund growing over time reduces financial stress about future expenses.
- Helps parents focus on long-term value creation rather than short-term returns, aligning with their child’s future needs.
- With lock-in periods and goal-oriented structure, funds are less likely to be used for non-essential purposes.
- As kids grow older, involving them in the investment process can help teach the value of money and planning.
- You can plan for multiple goals—schooling, college, extracurriculars, or starting a business—by choosing different funds.
- Helps beat inflation: Especially with equity-oriented funds, it helps your savings grow faster than inflation over the long term.
How to invest in a Children's Mutual Fund?
- Select a reputable Asset Management Company (AMC) with a strong track record.
- Decide on the fund category based on your risk tolerance and time horizon.
- Choose between a lump sum investment and an SIP.
- Monitor the fund's performance periodically to ensure you're on track.
Also Read: Does NAV matter in Mutual Funds?
Conclusion
Children's Mutual Funds are a smart way to plan for your child’s future. They combine growth potential with stability, making them ideal for long-term goals like education or major milestones. While there may be some risks and lock-in periods, starting early and investing regularly can help your money grow with your child.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
Mutual Fund investments are subject to market risk, read all scheme related documents carefully. Axis Bank Ltd is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Purchase of Mutual Funds by Axis Bank’s customer is purely voluntary and not linked to availment of any other facility from the Bank. T&C apply.
