Ensuring a bright future for your child is of utmost importance, and both marriage and education play crucial roles in shaping their path to success. However, many of us tend to neglect planning for our children's education until the last moment, and some even adopt incomplete strategies. To address this concern, Children's Gift Funds (CGF) come into play.
What is a Children's Gift Fund?
Children's Gift Funds are mutual funds designed to provide financial benefits to your children during important life events such as weddings, higher education, and other essential expenses.
These funds invest in a combination of Debt and Equity Instruments, aiming for long-term growth rather than short-term market volatility.
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It is recommended to consult your financial advisor or MFD about what you can do to invest in mutual funds to fund your child's education.
Benefit of Children Gift Fund
- Long-term Growth: CGFs enable investors to secure long-term growth, allowing their children to reap the benefits as they grow older.
- Fulfilling Dreams: By using these fund plans, children can pursue their goals without facing financial constraints.
- Discouraging Impulsive Withdrawals: Opting for a child's mutual fund scheme encourages investors to think carefully before withdrawing funds, discouraging premature exits.
- Specific Objective Allocation: Child mutual fund plans help allocate funds for specific objectives, making it easy for parents to assess the performance of each segment.
- Diverse Goals: CGFs cater to various stages of a child's development, including educational needs, higher education expenses, wedding plans, home and car purchases, and more, making budget allocation more manageable.
Disadvantage of Children Gift Fund
SEBI defines a Solution-oriented Children's fund as an unrestricted fund to invest in children who have an initial lock-in period of five years or until the child is the majority, whichever comes first.
Child-oriented mutual funds don't offer any unique benefits aside from the fact that they must be registered under the name of the minor and are locked in for five years or until the time the child is 18. In some ways, these aspects may hinder any decision to leave a fund, which is beneficial for any equity-oriented investment.
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The child education plans offered by mutual fund companies are not logical because they are subject to unneeded restrictions.
Taxation
The current Income Tax Act provisions state that the income earned by the minor will be added to the income of the guardian or parent. The tax would be imposed in the hands of the guardian or parent. Not eligible for 80 C benefit.
Document require for CGF
To invest in the Children gift mutual fund, investors must submit certain KYC documents. The KYC documents provide information regarding the child and investors, i.e. parents or guardians.
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When redeeming the funds or when the child is at an age at which they are mature further KYC documents need to be provided.
List of Children Gift Fund
- Axis Children's Gift Fund
- Franklin Children's Asset Plan
- HDFC Children's Gift Fund
- ICICI Pru Children Care
- Tata Young Citizen Fund
- UTI Children's Career Plan
Children Gift Fund – 10 Yr Performance
Monthly SIP Started from Jun 2012, total Installment 120. NAV date 6 May 2022
| Scheme Name | SIP Amt | Total Invest | Current NAV | Current Value | CAGR % |
|---|---|---|---|---|---|
| HDFC Children's Gift Fund | 5,000 | 6,00,000 | 176.88 | 12,10,892 | 13.63% |
| UTI Children's Career Fund | 5,000 | 6,00,000 | 54.66 | 11,65,823 | 12.91% |
| ICICI Prudential Child Care Fund | 5,000 | 6,00,000 | 184.71 | 10,68,486 | 11.25% |
| Tata Young Citizens Fund | 5,000 | 6,00,000 | 38.39 | 10,58,849 | 11.08% |
| LIC MF Children Gift Fund | 5,000 | 6,00,000 | 22.07 | 8,89,447 | 7.74% |
Children Gift Fund – 7 Yr Performance
| Scheme Name | SIP Amt | Investment Amt | NAV | Current Value | CAGR % |
|---|---|---|---|---|---|
| HDFC Children's Gift Fund | 5,000 | 4,20,000 | 176.88 | 6,56,130 | 12.76% |
| UTI Children's Career Fund | 5,000 | 4,20,000 | 54.66 | 6,49,386 | 12.47% |
| Tata Young Citizen Fund | 5,000 | 4,20,000 | 38.39 | 6,26,476 | 11.44% |
| ICICI Prudential Child Care Fund | 5,000 | 4,20,000 | 184.71 | 5,90,684 | 9.76% |
| LIC MF Children's Gift Fund | 5,000 | 4,20,000 | 22.07 | 5,37,348 | 7.06% |
Children Gift Fund – 5 Yr Performance
| Scheme Name | SIP Amt | Investment Amt | NAV | Current Value | CAGR % |
|---|---|---|---|---|---|
| HDFC Children's Gift Fund | 5,000 | 3,00,000 | 176.88 | 4,14,343 | 13.23% |
| Tata Young Citizen Fund | 5,000 | 3,00,000 | 38.39 | 4,14,332 | 13.23% |
| UTI Children's Career Fund | 5,000 | 3,00,000 | 54.66 | 4,09,483 | 12.74% |
| ICICI Prudential Child Care Fund | 5,000 | 3,00,000 | 184.71 | 3,83,498 | 10.03% |
| LIC MF Children's Gift Fund | 5,000 | 3,00,000 | 22.07 | 3,62,549 | 7.72% |
Conclusion
If you are looking to invest money for child, it is still possible under their name or that of their child within any good mutual fund schemes with an open-ended structure.
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The parent must remain focused enough not to be shaken by the short-term volatility in returns.
Take the help of an advisor or wealth manager who can assist you with investing most efficiently for your child.
