Making sure your child's future is crucial to you, and marriage and education are an essential part of that.
Yet, many of us tend to leave planning for our children's education at the last minute, and others rely on a half-baked strategy.
What is a Children's Gift Fund?
Children's Gift Funds (CGF) are mutual funds that provide returns that provide financial benefits to your children in the event of necessities such as covering wedding costs, future education needs and other essential expenses.
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Gift Funds invest in a combination of Debt and Equity Instruments.
The funds must be used for long-term objectives. When investing in such an investment, one must avoid market volatility in the short term and concentrate on the return which will be realized within the next few years.
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.
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Benefit of Children Gift Fund
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.
The child education plans offered by mutual fund companies are not logical because they are subject to unneeded restrictions.
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Taxation for Children Gift Fund
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 Mutual Fund:
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.
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
Children Gift Fund – 10 year SIP 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 year SIP Performance
Monthly SIP Started from Jun 2015, total Installment 84. NAV date 6 May 2022
| 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 year SIP Performance
Monthly SIP Started from Jun 2017, total Installment 60. NAV date 6 May 2022
| 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.
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.
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