Growing Their Future: Why Mutual Funds Are a Smart Investment for Minors

Planning for a child’s future is an inherent parental instinct. From saving for their education to securing their financial independence, every step counts. While traditional savings accounts have their place, consider a powerful tool for long-term wealth creation for your child - mutual funds in their name.

Building a Nest Egg Early

Mutual funds offer a pool of professionally managed investments, spreading your risk across various asset classes like stocks and bonds. Starting a mutual fund investment for your child allows them to benefit from the power of compounding over a long period. Even small, regular investments (SIPs) can grow significantly over time, thanks to compound interest.

Tax Advantages You Can’t Ignore

Investing in a minor’s name unlocks attractive tax benefits. Parents can invest consistently for their child’s long-term goals like higher education or marriage.

Here’s the Advantage: When the minor turns 18 (becomes an adult), any capital gains earned from redeeming the investments are likely to be taxed minimally. This is because minors typically have little to no income, resulting in a lower tax bracket compared to most parents. In essence, investing in a minor’s name has the potential for significant tax savings.

Investing Made Easy

Opening a mutual fund account for a minor is a straightforward process and can be done completely online. Here’s what you need to know:

• Account Type: You’ll need to choose a “On Behalf of Minor” where you act as the guardian and manage the investments until the minor reaches adulthood (typically 18).
• Documentation: Basic documents like the minor’s birth certificate, a cheque leaf of the bank account where the minor’s name is mentioned, your KYC documents, and a duly filled account opening form are usually required.

• Investment Options: Once an investment account is created you can invest in all the schemes of mutual funds either via SIP or in a lump sum.

• Starting Small: Investing in Mutual Funds is not only easy but also one can start with a very small amount as well. The amount can be as low as Rs. 10 for a few Index Funds.

Remember

• Long-Term Focus: Investing in a minor is a long-term commitment. Choose a growth-oriented fund with a long investment horizon to benefit from market fluctuations.
• Financial Literacy: As your child grows older, involve them in discussions about investment and explain the importance of financial planning.
• Professional Guidance: Consulting a financial advisor can help you navigate investment options and create a personalized plan for your child’s financial future.

Investing in a mutual fund for your child is a gift that keeps on giving. It’s a way to provide them with a head start toward financial security and empower them to achieve their dreams.

Ready to invest in your child’s future with mutual funds? Contact us today!