Best Children’s Mutual Funds to Invest in 2025
Why Invest in Children’s Mutual Funds?
Every parent dreams of giving their child the best possible future — be it quality education, dream career, or a lavish wedding. Children’s mutual funds are specially designed for long-term goals and provide a mix of capital growth and financial security.
With the power of compounding and long-term discipline, these funds can help you beat inflation and build a strong financial cushion for your child by the time they reach adulthood.
Features of Children’s Mutual Funds
- Lock-in Period: Typically till the child turns 18
- Tax Benefits: Exempt under Section 80C (if ELSS-based or ULIP-linked)
- Auto-switch Options: Some funds move from equity to debt over time
- Goal-Oriented: Tailored for specific life-stage goals like education or marriage
Best Children’s Mutual Funds to Invest in May 2025
1. HDFC Children’s Gift Fund – Investment Plan
- Type: Hybrid – Equity-oriented
- Returns (5-Year): ~11.2% CAGR
- Lock-in: Till the child turns 18
Why Choose?: Strong long-term equity exposure with solid risk-adjusted returns. Great for early-stage investments (age 1–10).
2. UTI CCF – Savings Plan
- Type: Hybrid – Debt-oriented
- Returns (5-Year): ~7.5% CAGR
- Lock-in: Yes
Why Choose?: Lower risk, suitable for children closer to college age or for short-term education planning.
3. Axis Children’s Gift Fund
- Type: Hybrid (Equity-Oriented Aggressive Hybrid)
- Returns (Since Launch): ~10.8% CAGR
- Features: 5-year lock-in, post which money can be withdrawn
Why Choose?: Focuses on goal-based investing with a disciplined withdrawal structure.
4. LIC MF Children’s Fund
- Type: Balanced Hybrid
- Returns: ~8.2% CAGR
- Lock-in: Till 18 years
Why Choose?: Backed by LIC, offers a safer bet with moderate returns for conservative parents.
5. SBI Magnum Children’s Benefit Fund – Investment Plan
- Type: Hybrid
- Returns (3-Year): ~9.6% CAGR
- Lock-in: Flexible
Why Choose?: Government-backed AMC, known for its stable performance and disciplined asset allocation.
How to Choose the Right Children’s Mutual Fund
| Criteria | Considerations |
|---|---|
| Goal | Education, marriage, corpus building |
| Time Horizon | Choose equity-oriented funds if you have 10+ years |
| Risk Appetite | Conservative? Go with debt-heavy funds |
| Lock-in | Check if funds are locked till age 18 |
| Fund Type | Choose between equity, debt or hybrid based on child’s age |
Expert Tips for Parents
- Start as early as possible — even a ₹1,000 monthly SIP from age 1 can grow into lakhs.
- Rebalance your fund when your child turns 13–14 to reduce equity risk.
- Use SIP + STP approach: Start SIPs and switch to safer instruments gradually.
- Link funds to real goals: Use different folios for education and marriage.
Taxation on Children’s Mutual Funds
- There’s no special tax benefit unless the fund is ELSS-linked.
- Returns are taxed like other mutual funds — short-term and long-term capital gains apply.
- Gifted money from parents to minor child is tax-free in parents’ hands.
Frequently Asked Questions (FAQs)
Q: Can I withdraw from a children’s mutual fund before 18?
A: Most of these funds are locked until the child turns 18, but some hybrid funds offer flexible withdrawal options after 5 years.
Q: Who should be the primary holder?
A: The investment should be in the child’s name, with the parent or guardian as the guardian account holder.
Q: Are children’s mutual funds better than traditional child insurance plans?
A: Yes, in most cases. Mutual funds offer transparency, higher returns, and flexibility compared to traditional endowment or ULIP plans.
Final Thoughts
Children’s mutual funds are a powerful way to build long-term wealth for your child’s future. By starting early, staying consistent with SIPs, and choosing the right fund mix, you can easily meet high-cost goals like foreign education, marriage, or entrepreneurship.
Start small, think long, and stay disciplined. The best gift you can give your child is financial freedom.
Internal Linking Suggestions
- SIP vs Lump Sum for Children’s Education
- Best SIP Mutual Funds for Long-Term Goals
- How to Start a Mutual Fund in a Minor’s Name
Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing.
Past performance is not indicative of future results.
The information provided here is for educational purposes only and should not be considered financial advice. Investors should consult with a qualified financial advisor before making any investment decisions.