Best Mutual Funds for Kidsby Jayant Harde Our associates have a rich corporate experience of
The dream of every parent is to make sure that their child gets the best of all. As parents, you’re concerned about your child’s little need, but schooling and marriage are the biggest concerns that you don’t want to compromise on anything. Only by taking a small step towards the future can you be concerned about these issues. Mutual Funds are an excellent way to invest in the future of a child.
Before becoming an adult, many parents want to create a corpus for their child so it can be useful for higher education. We also funnel cash from piggy banks, small amounts earned as presents on occasions such as their birthday, win a race, do well in a sport, and so on to mutual funds. There are some mutual fund schemes on the market that provide returns that would provide your children with financial advantages for needs such as meeting wedding expenses, potential educational needs, etc. Its long-term capital appreciation would fall under the Hybrid or Balanced Mutual Funds category. Such funds invest in a debt-to-equity combination. Fixed income securities and shares are an example of the debt instrument.
Will mutual funds authorize investment in a child’s name? How is it going to work?
Indeed, in the name of a minor child whose age is less than 18 years, any mutual fund house allows investment in any scheme. There is no age limit or investment sum restriction. In such a folio, the child is to be the first and only owner. There will be no joint holder allowed in this folio. In the folio, the guardian should be either a parent (i.e. father or mother) or a legal guardian appointed by the court.
Is it different from the documentation? What kind of documentation would you need?
In order to make any mutual fund investment in the name of a child, a valid proof of the child’s age and relationship with the child must be submitted. You can typically give a birth certificate, passport copy, etc. showing the date of birth of the minor and the guardian’s (natural or legal guardian’s) relationship with the minor. While making the first investment or opening a folio, this needs to be provided. These documents are not required for subsequent investments in the same folio of the same fund house. Compliance with KYC regulations is mandatory for the guardian. If the investment is routed through the bank account of the parent, a third-party declaration form must be submitted. Alternatively, you can go straight ahead.
When the child turns 18 years, how do things change?
When the child reaches the age of 18, all SIP / STP will be suspended in the folio. The folio will be frozen by the guardian from the date of minor majority achievement for operation.
Why should you invest in mutual funds for children?
- Children’s gift mutual funds promote the allocation of long-term funds growth by individuals. The returns from such long-term plans will help their kids grow up.
- With the support of these fund plans, a child will fulfill his or her goals without having to sacrifice them due to financial constraints.
- The shareholder would not refund or withdraw funds without careful consideration if a child’s mutual fund program is taken. It discourages investors from abruptly leaving for a substantial period of time without sticking to it.
- Child mutual fund plans help to allocate multiple funds to suitable goals. Therefore, for specific purposes, your investment portfolio will have clear segments. You will find it easy to evaluate the performance of each segment as a parent and as a responsible investor. If any segment has a problem, you can take steps to rectify it without any struggle.
- Different targets can be accomplished with child mutual fund plans for different phases of a child. For example, schooling for a child, higher education, health care needs, wedding plans, plans to buy a house, plans to buy a car, etc. It is therefore necessary and helpful to categorize funds in a budget.
- If your child’s mutual fund program is a debt-based system, you will benefit greatly from tax efficiency. You don’t have to worry about paying taxes for several years when you spend in the name of your son. For long-term investments, therefore, they are very good. Until you redeem a fund unit, you will not face any tax implication.In fact, when the time goes by, the indexing profit would eventually reduce the tax to almost zero.
- When you want to take a child’s gift mutual fund scheme, you can enjoy custom or tailor-made fund schemes.
Created on Dec 9th 2019 07:32. Viewed 147 times.