🎓 Best Children’s Mutual Funds to Invest in 2025 [Updated Guide]
👶 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Features: 5-year lock-in, post which money can be withdrawn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.