Planning for a child's education is a vital financial goal for parents. Mutual fund investments are versatile and can help achieve a variety of financial objectives. 
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Planning for a child's education is a vital financial goal for parents. Mutual fund investments are versatile and can help achieve a variety of financial objectives. Radhika Gupta, CEO of Edelweiss Mutual Fund, highlighted the advantages of initiating a systematic investment plan (SIP) in a child's name during the launch of a minor folio for children. Gupta emphasised that establishing an SIP in the child's name not only fosters good financial habits for the future, but also instills a sense of goal-driven, long-term investment approach when the folio is owned in your child's name.
"The benefit of starting an SIP in your child's name is that it not only helps teach good money habits later, but when the folio belongs to the child, one tends to be more goal-oriented and long-term. One should ideally start this as soon as possible and for a specific goal," Gupta said.
Children's Mutual Funds are a unique type of mutual fund scheme designed to help parents save for their children's future needs such as education, marriage, and overall well-being. These funds in India are specifically designed for long-term financial planning for children. It is recommended to begin planning for your child's education early on in order to secure their future. Sebi defines children's funds as schemes with a minimum lock-in period of five years or until the child reaches the age of majority, whichever comes first.
One frequently used strategy to reach long-term financial goals, like funding a child's college education, is by employing Systematic Investment Plans (SIPs). SIPs provide a methodical way of investing that enables parents to gradually build up the necessary funds.
Top funds available for your child's future
> Tata Young Citizen Fund
As of January 31, 2025, the Tata Young Citizens Fund Direct Growth had the following returns:
1 year: 7.34% annualized return
3 years: 13.12% annualized return
5 years: 18.06% annualized return
As of February 17, 2025, the Tata Young Citizens Fund Regular Plan had the following returns:
1 year: 2.28% trailing return
3 years: 12.15% trailing return
5 years: 15.92% trailing return
Since launch: 12.69% trailing return
> HDFC Children's Gift Fund
1 Year: 5.66%
2 Year: 15.96%
3 Year: 14.10%
5 Year: 16.40%
10 Year: 12.32%
Since Inception: 15.99%
> UTI Children's Equity Fund(G)
1 Year: 7.8%
3 Year: 10.6%
5 Year: 15.5%
Other funds
For a three-year period, SBI Magnum Children's Benefit Fund-Savings Plan generated a return of approximately 12.61%, while LIC MF Children’s Fund had a return of 10.31%.
Over the past three years, these funds have yielded an average return of about 11.07%. The highest return was achieved by SBI Magnum Children's Benefit Fund-Investment Plan, offering around 18.23%. LIC MF Children’s Fund and UTI Children's Hybrid Fund provided returns of 8.89% and 7.98%, respectively.
Other options
NPS Vatsalya Scheme: The NPS Vatsalya Scheme, introduced by the central government, allows parents to invest in their children's future financial security. The scheme has a minimum annual contribution of Rs 1,000 with no upper contribution limit.
The government introduced the NPS Vatsalya scheme to encourage early and disciplined investments for children. In the latest Budget 2025 announcement, Union Finance Minister Nirmala Sitharaman revealed upgraded tax benefits for the NPS Vatsalya Scheme. Now, parents or guardians can avail deductions of up to Rs 50,000 annually under Section 80CCD(1B) of the IT Act.
These revised NPS Vatsalya tax benefits allow parents to save an additional ₹50,000 annually under Section 80CCD(1B), alongside the existing ₹1.5 lakh limit under Section 80C. This combination of deductions makes the scheme a valuable tool for long-term wealth accumulation. It offers significant tax advantages for parents and guardians who invest in this scheme for their children.
SSY: Sukanya Samriddhi Yojana (SSY) is a savings scheme specifically designed for the benefit of girl children. The scheme offers an interest rate of 8.2% per annum for the current quarter. Parents can open an account in the name of their daughter if she is below 10 years of age.
SSY has a maturity period of 21 years, with the unique feature that investors only need to invest for 15 years. The account matures after an additional 6 years, during which interest continues to accumulate at the fixed rate and benefits from compounding.
Starting the scheme for a newborn girl means the account will mature when she turns 21, providing crucial funds for her higher education or marriage.
It is a 21-year program, but once the girl reaches 18, she can withdraw up to 50% of the balance for higher education. Additionally, the account can also be closed for the girl's marriage after she turns 18.
Recurring Deposits (RDs)
Parents looking to secure their children's future may consider investing in Recurring Deposits (RDs). This low-risk investment option allows for regular deposits, helping parents build a corpus over time. RDs are available through banks and post offices, providing a stable choice for saving for children.
Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a secure long-term investment option that allows for annual investments ranging from ₹500 to ₹1.5 lakhs. With a 15-year lock-in period, PPF typically offers returns above 8%. Not only does PPF qualify for tax benefits under Section 80C, but the interest earned is also tax-free.
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