Children's gift mutual funds: All about this investment option
What's the story
Children's gift mutual funds are becoming a popular investment option for parents who want to secure their child's future. These funds allow you to invest in mutual funds as gifts, which can grow over the years. Unlike traditional gifts, which may lose their value over time, these funds provide the potential for capital appreciation. Here are five key insights into children's gift mutual funds.
#1
Understanding children's gift mutual funds
Children's gift mutual funds are special schemes where you can invest on behalf of a child. The investments made in these funds are managed by professional fund managers and invested in a mix of stocks and bonds. The aim is to provide long-term growth, making it an ideal option for parents looking to build a financial cushion for their kids.
#2
Tax benefits associated with investments
Investing in children's gift mutual funds also comes with tax benefits. In India, the amount invested up to ₹1.5 lakh in such schemes can be claimed as a deduction under Section 80C of the Income Tax Act. This makes them an attractive option for parents looking to save on taxes while investing in their child's future.
#3
Flexibility in investment amount and frequency
One of the biggest advantages of children's gift mutual funds is the flexibility they offer in terms of investment amount and frequency. Parents can choose how much they want to invest regularly or as a lump sum. This flexibility allows you to tailor your investments based on your financial situation and goals.
#4
Long-term growth potential
Children's gift mutual funds provide long-term growth potential as they are invested in equity markets, which tend to give higher returns over time than fixed deposits or savings accounts. By investing early, parents can benefit from compounding returns, which can significantly increase the fund's value by the time the child reaches adulthood.
#5
Choosing the right fund for your child
Choosing the right fund is important when it comes to children's gift mutual funds. Parents should consider factors like risk appetite, fund performance history, expense ratios, and management quality before making a decision. Consulting financial advisors can help you make informed choices that align with your child's future needs and educational aspirations.