Zomint Blog
Zomint Blog
Zomint Blog
Why You Should Invest in Mutual Funds in Your Child’s Name
Feb 19, 2026
For most parents, the ultimate financial goal isn't retirement, it's their child’s future.
From birth, families plan for milestones decades away such as quality education, career freedom, and ambitious dreams. However, the price of these dreams has skyrocketed. Education inflation in India now far outpaces general inflation. Degrees that once cost a few lakhs now demand tens of lakhs, while global education can easily exceed a crore.
Traditional tools like Fixed Deposits and small savings schemes simply cannot keep pace.
While many parents have rightly turned to mutual funds, most miss a key insight: How you invest is just as important as what you invest in.
That is exactly what we explored in today’s newsletter.
Why Investing in a Child’s Name Matters
Many parents invest for their child, but few invest in the child's name. The difference is fundamental.
When you invest in your own name, the money remains part of the general family pot. Over time, these funds often get mixed with other goals or liquidated for emergencies and lifestyle needs.
Investing directly in the child’s name changes the structure completely. It creates a legal and psychological firewall around the corpus:
Legal Ownership: The child is the sole owner from day one; you act merely as the guardian until they turn 18.
Ring-Fencing: The money is clearly separated from household finances, protecting it from other demands.
Forced Discipline: The structure creates a barrier to withdrawal, preventing impulsive decisions during market volatility or short-term cash crunches.
Over the long term, this behavioral discipline is often just as valuable as the investment returns themselves.
Why Mutual Funds Are Powerful for Child Goals
The biggest strength of mutual funds in child planning is their ability to beat inflation. While traditional options like fixed deposits offer safety, their returns often lag behind the rapidly rising cost of education.
Mutual funds, especially equity funds solve this by combining growth with flexibility. They allow your money to compound aggressively in the early years and let you shift to safer assets as you get closer to the goal. This makes them ideal for timelines of 10 to 20 years.
The Power of Starting Early
Time is your greatest ally. Since child goals are long-term, your investments have years to benefit from compounding. Even a small delay can drastically reduce your final corpus.
The impact of time is clear in this example:
₹10,000 Monthly SIP at 12% Return
Duration | Total Invested | Final Corpus | Actual Return |
10 years | ₹12 lakh | ~₹23 lakh | ₹11 lakh |
15 years | ₹18 lakh | ~₹50 lakh | ₹32 lakh |
20 years | ₹24 lakh | ~₹1 crore | ₹76 lakh |
As the table shows, the biggest driver of wealth isn’t just how much you invest, but how early you begin.
Starting early is vital, but so is structure. A disciplined SIP approach smooths out market volatility, while lump sum investments are perfect for bonuses or windfall income. Combining both ensures you stay on track.
As your child grows, your portfolio should evolve to protect your gains.
Ideal Portfolio Allocation According to Age
Child’s Age | Portfolio Focus |
0–5 years | Higher equity for growth |
6–12 years | Balanced equity and hybrid |
13–15 years | Gradual shift toward debt |
16–18 years | Mostly low-risk assets |
How to Start Investing in Your Child’s Name (Complete Process)
Step 1: Understand the Structure
The rules are simple:
Ownership: The child is the sole legal owner of the mutual fund units.
Management: You (the guardian) operate the account, making decisions and starting SIPs.
Timeline: You manage the account until the child turns 18.
Step 2: Gather Required Documents
You will need documents for both yourself and the child.
For the Child (Minor) | For the Parent (Guardian) |
Birth Certificate (Proof of Age) | PAN Card |
Minor's PAN Card (Mandatory) | Aadhaar (Address Proof) |
Aadhaar (if available) | Bank Account Details |
Step 3: Complete KYC & Bank Linking
The guardian must be KYC-compliant. Once verified, you can register the child’s details online on most platforms.
Crucial Banking Rule:
Investing: Money can come from the Guardian’s account or the Minor’s account.
Withdrawing: Redemption proceeds can only be credited to the Minor’s bank account.
Tip: Open a bank account in the child’s name early to avoid issues later.
Step 4: Start Investing
Once the folio is active, it works just like your personal account. You can start SIPs, make lump sum investments, or switch funds as needed.
What Happens When the Child Turns 18?
The "Minor to Major" transition is a mandatory legal process.
STEP 1- On the child's 18th birthday, the account is temporarily frozen. No new investments or withdrawals are allowed.
STEP 2- The child (now an adult) must complete their own KYC, submitting their PAN and updating their bank details.
STEP 3- Once verified, the guardian’s name is removed. The child takes full control of the portfolio and future investment decisions.
The Key Takeaway/Conclusion
Planning for a child’s future is not just about saving regularly. It is about starting early, investing consistently, and allowing compounding to work over long periods.
However, building an effective child portfolio involves important decisions. Choosing the right funds, maintaining the right asset mix, and gradually rebalancing over time all play a critical role.
This is where professional guidance can make a meaningful difference.Parents who want a structured approach can speak with Our Wealth experts to plan their child’s long-term financial needs, design the right investment strategy, and start investing directly in their child’s name with clarity and confidence
For most parents, the ultimate financial goal isn't retirement, it's their child’s future.
From birth, families plan for milestones decades away such as quality education, career freedom, and ambitious dreams. However, the price of these dreams has skyrocketed. Education inflation in India now far outpaces general inflation. Degrees that once cost a few lakhs now demand tens of lakhs, while global education can easily exceed a crore.
Traditional tools like Fixed Deposits and small savings schemes simply cannot keep pace.
While many parents have rightly turned to mutual funds, most miss a key insight: How you invest is just as important as what you invest in.
That is exactly what we explored in today’s newsletter.
Why Investing in a Child’s Name Matters
Many parents invest for their child, but few invest in the child's name. The difference is fundamental.
When you invest in your own name, the money remains part of the general family pot. Over time, these funds often get mixed with other goals or liquidated for emergencies and lifestyle needs.
Investing directly in the child’s name changes the structure completely. It creates a legal and psychological firewall around the corpus:
Legal Ownership: The child is the sole owner from day one; you act merely as the guardian until they turn 18.
Ring-Fencing: The money is clearly separated from household finances, protecting it from other demands.
Forced Discipline: The structure creates a barrier to withdrawal, preventing impulsive decisions during market volatility or short-term cash crunches.
Over the long term, this behavioral discipline is often just as valuable as the investment returns themselves.
Why Mutual Funds Are Powerful for Child Goals
The biggest strength of mutual funds in child planning is their ability to beat inflation. While traditional options like fixed deposits offer safety, their returns often lag behind the rapidly rising cost of education.
Mutual funds, especially equity funds solve this by combining growth with flexibility. They allow your money to compound aggressively in the early years and let you shift to safer assets as you get closer to the goal. This makes them ideal for timelines of 10 to 20 years.
The Power of Starting Early
Time is your greatest ally. Since child goals are long-term, your investments have years to benefit from compounding. Even a small delay can drastically reduce your final corpus.
The impact of time is clear in this example:
₹10,000 Monthly SIP at 12% Return
Duration | Total Invested | Final Corpus | Actual Return |
10 years | ₹12 lakh | ~₹23 lakh | ₹11 lakh |
15 years | ₹18 lakh | ~₹50 lakh | ₹32 lakh |
20 years | ₹24 lakh | ~₹1 crore | ₹76 lakh |
As the table shows, the biggest driver of wealth isn’t just how much you invest, but how early you begin.
Starting early is vital, but so is structure. A disciplined SIP approach smooths out market volatility, while lump sum investments are perfect for bonuses or windfall income. Combining both ensures you stay on track.
As your child grows, your portfolio should evolve to protect your gains.
Ideal Portfolio Allocation According to Age
Child’s Age | Portfolio Focus |
0–5 years | Higher equity for growth |
6–12 years | Balanced equity and hybrid |
13–15 years | Gradual shift toward debt |
16–18 years | Mostly low-risk assets |
How to Start Investing in Your Child’s Name (Complete Process)
Step 1: Understand the Structure
The rules are simple:
Ownership: The child is the sole legal owner of the mutual fund units.
Management: You (the guardian) operate the account, making decisions and starting SIPs.
Timeline: You manage the account until the child turns 18.
Step 2: Gather Required Documents
You will need documents for both yourself and the child.
For the Child (Minor) | For the Parent (Guardian) |
Birth Certificate (Proof of Age) | PAN Card |
Minor's PAN Card (Mandatory) | Aadhaar (Address Proof) |
Aadhaar (if available) | Bank Account Details |
Step 3: Complete KYC & Bank Linking
The guardian must be KYC-compliant. Once verified, you can register the child’s details online on most platforms.
Crucial Banking Rule:
Investing: Money can come from the Guardian’s account or the Minor’s account.
Withdrawing: Redemption proceeds can only be credited to the Minor’s bank account.
Tip: Open a bank account in the child’s name early to avoid issues later.
Step 4: Start Investing
Once the folio is active, it works just like your personal account. You can start SIPs, make lump sum investments, or switch funds as needed.
What Happens When the Child Turns 18?
The "Minor to Major" transition is a mandatory legal process.
STEP 1- On the child's 18th birthday, the account is temporarily frozen. No new investments or withdrawals are allowed.
STEP 2- The child (now an adult) must complete their own KYC, submitting their PAN and updating their bank details.
STEP 3- Once verified, the guardian’s name is removed. The child takes full control of the portfolio and future investment decisions.
The Key Takeaway/Conclusion
Planning for a child’s future is not just about saving regularly. It is about starting early, investing consistently, and allowing compounding to work over long periods.
However, building an effective child portfolio involves important decisions. Choosing the right funds, maintaining the right asset mix, and gradually rebalancing over time all play a critical role.
This is where professional guidance can make a meaningful difference.Parents who want a structured approach can speak with Our Wealth experts to plan their child’s long-term financial needs, design the right investment strategy, and start investing directly in their child’s name with clarity and confidence
