Child Plan: In today’s era, children’s education is becoming very expensive. Especially for higher education, parents have to spend big amount. One of the major concerns for parents is that they can save a lot for their child before they reach adulthood, which can reduce stress about the future. For this, parents invest in many types of savings schemes. But now the returns on small savings have come down so much that it is difficult to fulfill the objective. In such a situation, a child mutual fund can be a better option.
There are many fund houses in the market which are offering special mutual funds for children. It has children plans from funds like HDFC, ACBI, Axis, ICICI Prudential, Tata and UTI. If we talk about their returns, they have given 12 to 15 per cent annual returns in the last 15 to 20 years.
Child plan only?
AK Nigam, director of BPN Fincap, says that any good mutual fund can be invested in the name of children. It is not necessary that in the name of the child, you can invest only in those funds with which the child is associated. Although there are some better plans among them too But apart from these, parents can also look at other mutual funds. Keep in mind that if you are doing SIP in the name of children, then the investment target should be at least 15 years.
HDFC Children’s Gift Fund
Launch Date: March 2, 2001
Return since launch: 16.12%
5000 rupees monthly SIP value in 15 years: 30 lakh rupees
Assets: 4270 crores (March 31, 2021)
Expense Ratio: 2.03% (February 28, 2021)
ICICI Prudential Child Care Fund
Launch Date: 31 August 2001
Return since launch: 15.48 percent
5000 rupees monthly SIP value in 15 years: 24 lakh rupees
Assets: 741 crores (March 31, 2021)
Expense Ratio: 2.45% (February 28, 2021)
SBI Magnum Children’s Benefit Fund
Launch Date: February 21, 2002
Return since launch: 10.36 percent
5000 rupees monthly SIP value in 15 years: 20 lakh rupees
Assets: 129 crores (March 31, 2021)
Expense Ratio: 2.70% (February 28, 2021)
(source: value research)
Note: Here are examples of the same Children’s Fund, who have completed 15 years in the market. Here, it is assumed that what will be the value of SIP from the time the child invests to the age of 3 years till the age of 18 years. The SIP calculation has been made the basis of the interest rate given to them till now.
Benefit of children plan
Experts say that some child plans give different options to investors depending on the composition of equity and debt. For example, for non-risk-taking investors, the option to choose a portfolio with more debt, while aggressive investors have the option to choose a portfolio with more equity. Experts say that the advantage with child plans is that they have a lock-in period, from which one cannot withdraw money before a certain time. In these, you cannot withdraw the investment till the age of 5 years or the child is adult.
(Disclaimer: Investing in mutual funds is subject to market risks. Financial Express does not recommend any type of investment. Investigate yourself or consult your financial advisor before investing.)