Parenting is a journey full of love, endless dreams, and sometimes a little worry too. It’s all about giving your child the best–whether it’s a good education, exciting opportunities, or simply the security of knowing their future is safe.
But let’s be real, with the rising cost of living and expenses piling up, it’s natural to feel a little overwhelmed. School fees, hobbies, future goals–everything adds up faster than we’d like. That’s why having a solid financial plan is so important.
Children’s mutual funds are here to help you take that step, giving you a way to secure your kid’s dreams without the constant worry of rising costs.
To make it easier, some of the top mutual funds in 2025 are specifically designed to align with your parenting goals, helping you secure their dreams one step at a time. Let’s check the deets!
What are Children’s Mutual Funds?
Children’s mutual funds are like a great net that offers financial support and keeps parenting a little less daunting. They are made to help parents or guardians invest in those life milestones, such as education, marriage, or any other dream the parent has for the child.
These funds usually invest in a combination of equity, debt, or balance assets to maintain a balance between growth and risk between parents and children as a good foundation for the future financial life of the child.
Why Are They Life Changing?
- Child in Spotlight
The investment is under the child’s name with you as guardian monitoring it till he/she attains an age of 18 or an age defined under law for making relevant investments.
- Future Oriented
It would aim specifically at funding processes under certain life goals, such as the education funding process or saving for marriage.
- Lock-In Duration
Some children’s mutual funds come with lock-in periods to ensure the money is used for its intended purpose.
- Easiest Way for SIPs
You can start from very small with Systematic Investment Plans (SIPs) to giving you consistent and hassle-free savings without having to save too much upfront. However, if you wish to invest a rough amount in one go, you can also opt for lumpsum investments. In order to calculate efficiently, you can use calculators for SIP Calculator and lumpsum Calculator investments.
- Tax Benefits
Depending on how the rules of your country operate, some funds may even grant tax benefits; This is like hitting two goals with one arrow!
Children’s mutual funds are all about providing disciplined saving with a strong potential for long-term growth so that it may give parents a framework within which they can approach their child regarding the big dreams he or she has set for himself.
History of Children’s Mutual Funds in India
The journey of children’s mutual funds in India is a tale of how families and finances have evolved together. It all started in the 1990s, a time when India’s economy was opening up, and mutual funds were just finding their footing. Back then, the focus was on basic investment categories like equity and debt. But as the years rolled by and financial awareness grew, parents began dreaming bigger–not just about providing for the present but securing their child’s future planning too.
Sensing this shift, the 2000s saw the rise of goal-oriented funds designed specifically for life’s big moments, like education and marriage. By 2004 – 2005, India welcomed its first children-specific mutual funds, like HDFC Children’s Gift Fund and UTI Children’s Career Fund, offering a mix of equity and debt to balance growth with stability.
Fast forward to the 2010s, and these funds became a go-to choice for parents looking beyond fixed deposits and insurance plans. With SIPs making saving simpler and SEBI regulations ensuring safety, children’s mutual funds grew in popularity, offering a disciplined way to plan for the future. Now, in the digital age, investing has become as easy as a few clicks, with customized solutions catering to every family’s needs.
These funds have become more than just financial products–they’re tools that empower parents to turn their dreams for their children into reality, blending growth, flexibility and peace of mind.
Top Children’s Mutual Funds Contenders in Past 5 Years
| Fund Name | 3 Year Returns (%) | 5 Year Returns (%) | Expense Ratio | AUM(INR) |
| ICICI Prudential Child Care Fund | 18.13% | 17.32% | 2.45% | ₹1320 Cr |
| Aditya Birla Sun Life Bal Bhavishya Yojna | 13.22% | 13.40% | 2.15% | ₹1087 Cr |
| SBI Magnum Children’s Benefit Fund – Investment Plan | 9.29% | – | 1.92% | ₹2962 Cr |
| Union Children’s Fund | 23.04% | – | 2.35% | ₹61 Cr |
| SBI Magnum Childrens Benefit Fund – Savings Plan | – | – | 1.21% | ₹123 Cr |
Data as of 16.12.24
Comparison of Fund Returns with Category Average
The top 5 children’s mutual funds collectively outperform the category average 3-year return of 2.09%, delivering impressive returns ranging from 9.29% to 23.04%.
While most have slightly higher expense ratios, their strong performance and varying AUMs indicate a balance of investor confidence and niche investment opportunities.
Overall, these funds showcase solid potential for long-term wealth creation despite higher costs.
Children’s Mutual Funds vs. Government Schemes
Government schemes like Sukanya Samriddhi Yojana and PPF are great for parents who prioritize safety and guaranteed returns, offering financial security with minimal risk. However, they often have lower returns and limited flexibility compared to children’s mutual funds, which focus on long-term growth by investing in equity, debt, or both.
While mutual funds carry some market risk, they’re ideal for beating inflation and achieving big goals like education or marriage through disciplined SIPs.
Below is a tabular comparison of children’s mutual funds and government schemes to help you choose what’s best for your child’s future:
| Aspect | Government Schemes | Children’s Mutual Funds |
| Focus Area | Social welfare, education, or marriage. | Long-term wealth creation for varied goals. |
| Guarantee | Principal and interest guaranteed by government. | No guarantee; market-linked returns. |
| Risk | Risk-free. | Risk depends on fund type (equity/debt). |
| Tax Benefits | Exempt under Section 80C (e.g., Sukanya Yojana). | Taxable, though ELSS mutual funds offer benefits. |
| Eligibility | Focused on specific criteria (e.g., girl child, BPL). | Open to any child as beneficiary. |
| Lock-In | Typically long-term (e.g., 21 years for SSY). | Flexible or defined lock-in (e.g., 5-7 years). |
Can Parents Invest in Any Mutual Fund for Their Kids?
Parents do not need to invest in children’s mutual funds only; they are free to invest in any mutual fund for their kids. Such general mutual funds could be anything from equity, debt, or hybrid to at least some of them intended towards such long-term goals as education or marriage. Such funds can be invested in the parent’s name, with the child being the beneficiary, and may include the risk appetite and time horizon in deciding what fund to use.
Also, children’s mutual funds are specified for those goals-in-child-education or marriage-involving a mix of equity and debt for balanced growth, while there’s usually that lock-in period that will guarantee that the funds will be directed toward the child’s future use. Thus, the general mutual funds would provide flexibility, while the children’s ones would prove to be quite disadvantageous regarding withdrawal rules.
For instance, ELSS funds could be used to obtain some tax-saving benefits, and mutual funds for children might have such features. However, although made for specific goals, even regular mutual funds can effectively achieve the same goal.
What’s the Right Time to Invest?
There is a parallel relationship between investment in children’s mutual fund and family planning or marriage goals, as all of them are future milestones that need early initiation of their finances. Here’s a quick view of how these goals fit into their investment strategy:
- Family Planning: Secures a future need in a child’s life, such as education and healthcare. Early investments through SIPs into balanced or equity children’s funds can give you much higher growth potential. These funds may have some lock-in periods or restrictions for future needs of the child.
- Marriage Planning: Aims at putting a corpus for a marriage in the future. Early investment into children’s mutual funds or a long-term balanced fund helps cope with a wedding’s costs. Like family planning, children funds may have some lock-in periods until the child turns 18.
Key Differences in Investment Strategies
| Goal | Children’s Education | Family Planning | Marriage Planning |
| Ideal Time to Start | As early as possible (when the child is born) | Early (pre-conception or early years of parenthood) | As early as possible (10–15 years before the wedding) |
| Investment Horizon | 10-20 years (until child reaches adulthood) | 10-20 years or more | 10-15 years or more |
| Recommended Fund Type | Equity-based or balanced mutual funds | Balanced or equity-based mutual funds | Equity or balanced funds for growth (with an eye on stability closer to the wedding date) |
| Lock-in Period | May have a lock-in (e.g., 5 years or until the child turns 18) | Depends on the fund chosen (regular funds have no lock-in) | Children’s mutual funds may have restrictions until the child reaches adulthood (18 years) |
| Withdrawal Flexibility | Restricted by goal (education-specific) | Flexible, but long-term approach is advised | May be restricted based on age or lock-in terms of children’s funds |
A Journey of Dreams: Comparing Two Paths for Aarya’s Future
Case A: Children’s Mutual Funds
Priya and Raj were excited when their daughter Arya was born. They knew that one of their biggest priorities was securing her financial future. So, they decided to invest in children’s mutual funds.
Case B: Traditional Investments
On the other hand, Priya and Raj had chosen traditional investment options, which they thought would be safer for their daughter’s future. They invested in a combination of Fixed Deposits (FDs), Public Provident Fund (PPF), and Sukanya Samriddhi Yojana (SSY).
Case A & B: A Comparison via SIP
| Investment Type | Investment Amount (per month) | Expected Return (%) | Total Value After 18 Years |
| Case A: Children’s Mutual Funds | ₹10,000 | 8% | ₹48,32,867 |
| Case B: Traditional Investments | ₹10,000 | 8% | ₹41,611 |
Observations
The study underscores the necessity of early financial planning and prudent investment decisions towards the future of a child.
With the arrival of their daughter, Aarya, Priya and Raj differed on their respective approaches-investing in children’s mutual funds (Case A) and going for traditional options of FDs, PPF, and SSY (Case B).
It brings out the magic of compounding, explaining how market-linked investments-certainly riskier-may turn out to pour a much larger corpus over the years comparing with the safer and lower yielding traditional investments. However, the study cautioned understanding return assumptions and eyeing the contents of projections as well.
By balancing risk and return through diversified investments, Aarya’s parents prepare better for her education, marriage, and other long-term goals, clearly ensuring her financial security in the future.
Pick or Drop
Who would be an Ideal Investor?
- Parents or guardians saving for a child’s future, like education or marriage.
- Investors with a long-term view (10-20 years).
- Those comfortable with moderate to high risk and the ups and downs of the market.
- People looking for a structured plan focused on specific child-related goals.
- Investors who want to tap into the growth potential of equities over the long run.
Who Should Reconsider?
- Those with short-term financial goals.
- Conservative investors who prefer low-risk options.
- People who aren’t sure about their long-term goals for their child.
- Individuals who need easy access to their money.
- Those seeking guaranteed returns over market-driven growth.
Understanding your financial goals, investment horizon, and risk tolerance will help you decide if children’s mutual funds are the right fit for securing your child’s future.
Conclusion
At the end of the day, securing your child’s future is the ultimate gift–a promise that no matter what, they’ll have the foundation to chase their dreams and build their own path. With children’s mutual funds, you’re not just investing in numbers, you’re investing in possibilities.
Whether it’s that dream college or a picture-perfect wedding, these funds are designed to turn big dreams into reality, all while giving you the peace of mind that your child’s future is set.
The best part? You don’t have to wait for the ‘perfect moment’ to start. The earlier you begin, the more you can watch those dreams grow, just like your child.
So why not start now? Give your little one the freedom to dream big and let those dreams shine bright with the power of smart, disciplined investing.
The future’s waiting–let’s make it happen!
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