Parents often worry about securing their children’s financial future. To build a substantial corpus for their growing-up years, many forward-thinking parents turn to various investment instruments, including mutual funds. One specific category tailored for children’s financial needs is known as “children’s mutual funds,” falling under the broader section of solution-oriented funds.
What Are Children’s Funds?
Children’s mutual funds are investment schemes designed for young children. Parents invest in these funds with the goal of accumulating savings for their children’s future. These schemes typically come with a lock-in period of five years, although most investors stay invested until their children are older. Children’s mutual funds allocate investments in both debt and equity.
For instance, LIC MF Children’s Gift Fund allocates 86 percent in equity and 10.8 percent in debt, while Tata Young Citizens Fund invests 97.8 percent in equity, with the remainder in cash. Currently, there are a total of 10 children’s mutual funds, according to the monthly data from the Association of Mutual Funds in India (AMFI).
· Number of Schemes: 10
· Net AUM (₹crore): 16,525.25
Data as of Aug 31, 2023
Interestingly, these schemes are less popular than another category of solution-oriented mutual funds, retirement funds, which boast 26 schemes. As of August 31, 2023, children’s mutual funds have a total net assets under management (AUM) of ₹16,525 crore. The two most popular schemes in this category are HDFC Children’s Gift Fund (₹7,396 crore) and UTI Children’s Career Fund-Savings Plan (₹4,228 crore).
Returns Posted by Children’s Funds
Children’s mutual funds have delivered a range of returns, typically between 8-15 percent per annum, as indicated in the table below:
· HDFC Children’s Gift Fund: 15.08 percent
· LIC MF Children’s Gift Fund: 10.79 percent
· UTI Children’s Career Fund-Savings Plan: 8.17 percent
· Tata Young Citizens Fund: 15.45 percent
Returns as of Oct 3, 2023
As observed in the table, while UTI Children’s Career Fund-Savings Plan offered an annualized return of 8.17 percent, Tata Young Citizens Fund provided an impressive 15.45 percent annualized return, and HDFC Children’s Gift Fund delivered an annualized return of 15.08 percent over the past five years.
Winding it up
Children’s mutual funds offer parents a valuable tool to secure their children’s financial future. These funds come with a lock-in period, invest in a mix of debt and equity, and have delivered respectable returns over the years. While they may be less popular than retirement funds, they provide a unique investment option tailored to the specific needs of parents planning for their children’s financial well-being.