Grandparents love to shower their grandkids with gifts from time to time. It’s their way of showing that they genuinely love and care about them. It’s not just the grandparents; parents love to express their love for kids as well.
Often the gift is material in nature, a brand-new dress or an expensive gadget, etc. While these gifts work to offer instant happiness to your child, a better form of gift would be one they would cherish for their life.
A gift that can work as a way to secure your child’s future. Don’t fret. We have the perfect gift for your child – children’s mutual funds.
What are children’s mutual funds?
Children’s mutual funds are a type of mutual fund designed to meet specific child-related goals, such as higher education, general welfare, marriage, etc. Falling under balanced funds or hybrid mutual funds, children’s mutual funds work towards long-term capital appreciation of your child’s corpus.
If the fund’s debt exposure is greater than 60%, then it is treated as a debt-oriented hybrid fund. On the other hand, if the fund’s equity exposure is greater than 60% of the corpus, then it would be treated as an equity-oriented hybrid mutual fund.
Who can invest in children’s mutual funds?
Parents or legal guardians are permitted to invest in these mutual funds. Investments in children’s mutual funds can be made only in the name of their minor child.
Points to consider before investing in children’s mutual fund
Before investing in children’s mutual funds, take note of the following pointers:
- Lock-in period – Understand your objectives before investing in mutual funds. Most gift mutual funds offer an elective lock-in facility. This ensures that your investment would be safeguarded until your child turns 18.
- Documents required – To invest in children’s mutual funds, an investor is required to submit some official documents that prove that you are a legal guardian or a parent of the child. While redeeming the fund, you might be required to furnish additional KYC documents.
While you can make a lumpsum investment in children’s mutual funds, a better and more sustainable way would be to go the SIP way. If you are wondering what is SIP, a SIP or a systematic investment plan is a tool to invest in mutual funds. Using SIP investments, you can gift your child units of the fund periodically.
The periodicity of the investments can be daily, weekly, monthly, quarterly, semi-annually, or annually. A SIP investment would provide you with much-needed discipline for your mutual fund investments. You can also use a SIP calculator to determine the SIP investment amount needed to reach a specific corpus. A SIP return calculator also helps to determine the future value of your investments.
Remember, there is no better gift than one that offers financial security to your child in the future. You can also consult an expert who can help you invest in mutual funds that are suitable for your portfolio. Happy investing!
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