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Puneinvest > Blog > Financial Planning > Is it Good to Invest Children Gift Fund (CGF)?
Financial PlanningChild Planning

Is it Good to Invest Children Gift Fund (CGF)?

Last updated: 2022/12/29 at 10:46 PM
Rajendra Todkar Published May 9, 2022
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Making sure your child’s future is crucial to you, and marriage and education are an essential part of that.

Contents
What is a Children’s Gift Fund?Benefit of Children Gift FundDisadvantage of Children Gift FundTaxation for Children Gift FundDocument require for Mutual Fund:List of Children Gift FundChildren Gift Fund – 10 year SIP Performance Children Gift Fund – 7 year SIP Performance Children Gift Fund – 5 year SIP Performance Conclusion

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.

Gift Funds invest in a combination of Debt and Equity Instruments.

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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.

Benefit of Children Gift Fund

  • Children gifts Fund allow investors to invest in funds to ensure long-term growth. The gains derived from these long-term plans can benefit their children as they are older.
  • Children can reach their goals by using these fund plans without sacrificing their dreams because of financial constraints.
  • When the investor chooses a child’s mutual funds scheme, they will not withdraw or redeem funds without thinking it through. This discourages investors from leaving quickly without adhering for a long time.
  • Child mutual fund plans to aid in allocating funds for specific objectives. So an investment portfolio can be divided into clearly defined segments to serve specific needs. As a parent and as an investor who is responsible, you’ll be able to make it simple to assess the performance of every segment.
  • With the help of child mutual fund plans with different goals, various levels of a child’s development are achievable. For instance, a child’s educational needs, higher education requirements and healthcare requirements such as wedding plans and home purchase plans, car purchase plans and so on. Therefore, categorizing money in a budget is vital and beneficial.

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.

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

  • Axis Children’s Gift Fund
  • Franklin Children’s Asset Plan
  • HDFC Children’s Gift Fund
  • ICICI Prudential Children Care
  • Tata Young Citizen Fund
  • UTI Children’s Career Plan

Children Gift Fund – 10 year SIP Performance

Monthly SIP Started from Jun 2012, total Installment 120. NAV date 6 May 2022

Scheme NameSIP AmtTotal InvestCurrent NAVCurrent ValueCAGR %
HDFC Children’s Gift Fund5,0006,00,000176.8812,10,89213.63%
UTI Children’s Career Fund5,0006,00,00054.6611,65,82312.91%
ICICI Prudential Child Care Fund5,0006,00,000184.7110,68,48611.25%
Tata Young Citizens Fund5,0006,00,00038.3910,58,84911.08%
LIC MF Children Gift Fund5,0006,00,00022.078,89,4477.74%
CGF – 10 year SIP Performance

Children Gift Fund – 7 year SIP Performance

Monthly SIP Started from Jun 2015, total Installment 84. NAV date 6 May 2022

Scheme NameSIP AmtInvestment AmtNAVCurrent ValueCAGR %
HDFC Children’s Gift Fund5,0004,20,000176.886,56,13012.76%
UTI Children’s Career Fund5,0004,20,00054.666,49,38612.47%
Tata Young Citizen Fund5,0004,20,00038.396,26,47611.44%
ICICI Prudential Child Care Fund5,0004,20,000184.715,90,6849.76%
LIC MF Children’s Gift Fund5,0004,20,00022.075,37,3487.06%
CGF – 7 year SIP Performance

Children Gift Fund – 5 year SIP Performance

Monthly SIP Started from Jun 2017, total Installment 60. NAV date 6 May 2022

Scheme NameSIP AmtInvestment AmtNAVCurrent ValueCAGR %
HDFC Children’s Gift Fund5,0003,00,000176.884,14,34313.23%
Tata Young Citizen Fund5,0003,00,00038.394,14,33213.23%
UTI Children’s Career Fund5,0003,00,00054.664,09,48312.74%
ICICI Prudential Child Care Fund5,0003,00,000184.713,83,49810.03%
LIC MF Children’s Gift Fund5,0003,00,00022.073,62,5497.72%
CGF – 5 year SIP Performance

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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