A Complete Guide to Children’s Mutual Funds for Securing Your Child's Future
8 April, 2025
Synopsis
The HDFC Bank SmartWealth app offers a Study Abroad SmartJar feature.
The app considers inflation when calculating future education expenses.
Users can choose between analyst-curated options or self-selected mutual fund schemes.
Early and consistent investing helps build adequate corpus for children's education.
The app allows starting investments with as little as ₹500 per month.
SmartJar creation process includes setting target duration and the amount needed.
Think of your morning coffee savings jar. At first, skipping that daily coffee and putting a few coins in might seem small - just like your child's early education costs. But over time, those coins add up to something meaningful. That's exactly how planning for your child's education works!
Right now, your child's school expenses might feel manageable. But education costs are like a snowball rolling downhill - they keep getting bigger and bigger, especially if you're dreaming of sending them abroad for studies. One day, that small snowball becomes huge, and without preparation, it might feel overwhelming.
But here's the good news - just like how saving small amounts regularly can fill up that coffee jar, investing in children’s mutual funds early can help you build a strong financial cushion for your child's future. This way, when that university acceptance letter arrives, you won't have to worry about fees - you'll be ready!
This article will help you to understand children’s mutual funds and the investment options for children’s education.
What is a Children's Fund?
A Children's Fund or Child Gifting Mutual Fund is designed specifically to meet various child-related financial needs, such as education expenses, higher studies abroad, healthcare, marriage, and other future requirements. These funds create a dedicated financial resource for your child's needs that can grow over time.
As your kids get older, their education expenses will increase exponentially. Investing in a Children's Fund can help you meet these rising costs for domestic or international education.
Features of Children's Funds
Investment Structure: These funds typically invest in a mix of equities, bonds, debt instruments, and money market instruments based on their investment strategy. Depending on your investment horizon and objectives, you can choose from equity-focused Children's Funds (higher risk, higher potential returns) or debt-focused Children's Funds (lower risk, more stable returns).
Lock-In Period: Children's Funds have a mandatory 5-year lock-in period or until the child becomes an adult (18 years), whichever is earlier. This encourages disciplined investing and prevents premature withdrawals.
Tax Benefits: These funds may qualify for tax deduction up to ₹1.5 lakhs under Section 80C of the Income Tax Act, 1961.
Professional Management: Experienced fund managers conduct in-depth research and analysis to invest the pooled money in various financial assets that can potentially earn good returns over time.
Child-Specific Design: Children's Funds allow parents to create a separate investment pool dedicated to their child's requirements, enabling better financial planning.
Special Benefits for Parents of Children with Disabilities: Parents can claim an annual exemption of ₹1,500 per child if the interest income exceeds ₹6,500 annually.
Who Should Invest in Children's Funds?
Children's Funds are ideal for:
Parents or guardians looking to secure their child's financial future.
Investors seeking a tailor-made fund specifically designed for children's needs.
Those who want tax benefits while investing in their child.
Parents who want to ensure their children have the sufficient financial backing to achieve their objectives in the future.
Several other investment options are available to secure your child's future educational needs in addition to Children's Funds.
Investment options for children’s education
United Linked Insurance Plan (ULIP): This plan combines insurance with investment in the equity and debt markets.
Government-backed funds: A savings scheme such as Sukanya Samriddhi Yojana (SSY), especially for girl children. Partial withdrawal is allowed when the child turns 18, and the account matures at 21 or upon marriage.
Fixed Deposit: Investors consider this route for the guaranteed returns and low risk.
Real Estate Investment: Investing in property in the future will yield rental income, which can be used to finance education.
How can you invest in mutual funds in education through the SmartWealth app?
If you have considered investing in a Children’s mutual fund and are looking for a simple option, consider the HDFC Bank SmartWealth app. Its easy-to-use features will help you invest wisely in no time. To avail of the benefit, follow the steps mentioned below -
Log in to HDFC Bank SmartWealth app.
Go to the ‘Discover’ option and click on the ‘View more/create your own’ section.
Select ‘Study Abroad’ from the given SmartJar.
Select the period in the ‘Target Duration’ section and the amount you need in the ‘Amount Needed’ section.
Click on Consider Inflation, or on ‘Adjust Inflation’ based on your market condition.
Click on ‘Create SmartJar’ to get the amount you need in the future considering inflation.
After that, you can choose between ‘With SmartWealth analytics’, where you get options curated by analysts, and ‘By myself,’ where you can select the mutual fund scheme for your investment.
Good investment options for children's education are based on various factors, such as risk appetite, time horizon, and different financial aims. Starting early and investing consistently helps you make enough corpus to secure your child’s future and always give them a happy morning.
Give your child's dreams wings! Download the HDFC Bank SmartWealth App now and start building their educational future with just ₹500 per month.
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