Best Mutual Fund Plans for Children 2025

For investors, the primary goal of investing is to generate returns and secure their financial future. Along with achieving personal financial goals, many investors also strive to make their children financially secure through their investments. Making sound financial decisions early on can help create a substantial corpus for your children. Investing in the best children's mutual fund is a way through which you can achieve this. Read on to learn more.

Best Children’s Mutual Funds to Invest in 2025

A children’s mutual fund is an investment option that specifically caters to children and their financial future. These funds are similar to other mutual funds but come with a 5-year lock-in period or till the child reaches adulthood. Here are some of the top mutual funds for a child that you can invest in.

The top children's mutual funds based on the 3-year annualised returns.

(Data as of January 31, 2025)

Overview of the Best Children’s Mutual Funds

Here are some key details about the best mutual funds for children.

(Please note, the data is as of January 31, 2025)

SBI Magnum Children's Benefit Fund Investment Plan Direct-Growth

• 3Y Annualised Returns – 20.46%
• Carries very high risk
• Assets Under Management (AUM) – Rs 3,245 crore
• 87.7% of funds allocated to equity, 8.1% held as cash, and 0.1% to debt.
• Minimum SIP – Not supported
•  Expense Ratio – 0.80%
• Inception Date – September 29, 2020

ICICI Prudential Child Care Fund-Gift Direct Plan

• 3Y Annualised Returns – 16.02%
• Carries moderately high-risk
• AUM – Rs 1,304.56 crore
• 84.2% of funds allocated to equity, 11.7% to debt, 4.1% held as cash
• Minimum SIP – Not supported
• Expense Ratio – 1.51%
• Inception Date – August 31, 2001

HDFC Children's Fund Direct Plan

• 3Y Annualised Returns – 15.85%
• Carries very high risk
• AUM – Rs 9,943.89 crore
• 65.5% of funds allocated to equity, 31% to debt, 3.5% held as cash
• Minimum SIP – Not supported
• Expense Ratio – 0.89%
• Inception Date – January 1, 2013

Tata Young Citizens Direct

• 3Y Annualised Returns – 13.22%
• Carries very high risk
• AUM – Rs 361.58 crore
• 95% of funds allocated to equity and 3.5% held as cash
• Minimum SIP – Not supported
• Expense Ratio – 1.90%
• Inception Date – January 1, 2013

SBI Magnum Children's Benefit Fund Savings Plan Direct

• 3Y Annualised Returns – 12.17%
• Carries moderately high-risk
• AUM – Rs 123.04 crore
• 68.9% of funds allocated to debt, 22.1% to equity, and 9.1% held as cash
• Minimum SIP – Not supported
• Expense Ratio – 0.85%
• Inception Date – January 1, 2013

Aditya Birla Sun Life Bal Bhavishya Yojna Direct Growth

• 3Y Annualised Returns – 12.08%
• Carries moderately high-risk
• AUM – Rs 1,083.21crore
• 97.6% of funds allocated to equity, and 2.4% held as cash
• Minimum SIP – Not supported
• Expense Ratio – 0.79%
• Inception Date – February 11, 2019

LIC MF Children's Fund Direct-Growth

• 3Y Annualised Returns – 11.73%
• Carries very high risk
• AUM – Rs 16.81crore
• 87.4% of funds allocated to equity, 91% to debt, and 3.5% held as cash
• Minimum SIP – Not supported
• Expense Ratio – 1.68%
• Inception Date – January 16, 2013

UTI Children's Equity Fund Direct-Growth

• 3Y Annualised Returns – 10.70%
• Carries very high risk
• AUM – Rs 1,107.47 crore
• 98.6% of funds allocated to equity, 0.1% to debt, and 1.3% held as cash
• Minimum SIP – Not supported
• Expense Ratio – 1.19%
• Inception Date – January 2, 2013

Advantages of Investing in a Mutual Fund for Children

There are several significant advantages to investing in the best children’s mutual funds.

Potential for Growth

For investors, growing their corpus and generating wealth is a key goal. By investing in a children’s mutual fund, investors can park the funds for the long term and provide a substantial sum for their children, securing their financial future.

Helps Stay Invested

Most children’s mutual funds have a lock-in period of 5 years. Any early withdrawals may attract penalties and fines which may impact any potential gains. As a result, investors are more likely to stay invested for the long term and follow a disciplined investment approach.

Tax Benefits

Investing in instruments such as a children’s mutual fund benefits the investor by way of tax benefits under Section 80C of the Income Tax Act. As a result, this investment is not only a good way to grow your funds but also enjoy tax benefits.

Securing Your Child’s Future

The primary goal and advantage of a children’s mutual fund is that it is a useful tool to secure your child’s future. The capital appreciation of a children’s mutual fund can enable your child to pursue further education or kick-start a career.

Flexibility

A children’s mutual fund also offers flexibility to investors. They can decide on the investment tenure as these funds usually have a 5-year lock-in period or till the child reaches adulthood. This allows the investors to plan their investments according to their financial goals. Moreover, ownership of a children’s mutual fund can also be transferred to the child once they reach adulthood after completing the necessary KYC requirements.

Things to Consider Before Investing in a Children’s Mutual Fund

Here are some key points that one should consider before investing in a children’s mutual fund.

• A children’s mutual fund typically has a lock-in period of 5 years. Before investing, it is crucial to evaluate your investment horizon and liquidity requirements.
• The risk of a children’s mutual fund ranges from moderate to high. While making an investment decision in a mutual fund for a child, make sure you understand your risk appetite and decide accordingly.
• Compare the expense ratio, costs, fees, and penalties of different funds before investing.  

Conclusion

As a parent, investing in the best children’s mutual fund can be a significant decision that can provide a bright future for your child. These funds not only encourage an investor to stay invested but also gain from capital growth and tax benefits. Carefully compare different funds, their performance, and the lock-in period before making your investment decision.

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

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Research Analyst - Bavadharini KS