Children’s Gift Funds – Mutual Fund Schemes – Details, Comparison & Review

Childrens Gift Funds_Mutual Fund Schemes_Details, Comparison & Review

As a caring parent you would always want your child to get the very best. Investing for a child’s bright future is one of the most critical financial goals.

In the name of ‘child’s bright future’, parents are always lured with all kinds of financial products by financial advisers or financial institutions. Child Plans offered by Life Insurance companies are sold like hot cakes. They are always a big hit in India. Mutual Fund companies also have exclusive schemes for planning your Child’s future goals (Kid’s Education goal, Kid’s marriage goal etc.,).

Most of the top Mutual Fund houses like HDFC, TATA, Franklin, ICICI, UTI etc., have children oriented schemes. Axis has recently launched its NFO called ‘ Axis Children’s Gift Fund’ with an aim to collect Rs 700 crore.

In this post, let us understand – What are Children’s Gift Funds offered by Mutual Fund companies? What are the factors that need to be considered before investing in children’s funds? Which are the best and top performing Children’s Gift Mutual Funds? Should you invest in Child plan Mutual Fund Schemes? Should you invest in Axis Children’s Gift New Fund offer?

What are Children’s Gift Funds ?

Children’s Gift funds are dedicated mutual fund schemes which are positioned as Child plans to meet children’s future financial needs like education, marriage expenses etc.,.

These can be categorized as normal ‘Balanced Mutual Funds’ or ‘Hybrid Funds’. These funds invest in both Equity (shares) and Debt Instruments (Fixed Income Securities).

These funds can further be classified as ‘Hybrid – Equity Oriented’ or ‘Hybrid-Debt Oriented’ based on their exposure to Equities.Hybrid Speciality Funds Balanced Fund Childrens Gift funds pic

If the average equity exposure of a balanced fund is more than say 65% and the remaining 35% is in debt products then it is treated as a Balanced Fund – Equity oriented. This means major portion of the fund’s assets are invested in equity.

If the average debt exposure is around 60% and equity is 40% then these funds are treated as balanced funds – Debt oriented. (These proportions can vary among different balanced funds) 

Important points to consider before buying Children’s Gift Funds

Below are some of the important points to ponder upon before investing in child oriented mutual fund schemes;

  • Fund’s Investment Objective – As discussed above, check out the asset allocation and investment strategy of the fund. Is it debt-oriented or equity oriented or offering both the options?
  • Lock-in Period – Most of the child funds offer optional lock-in facility. Investments will be locked-in till child attains 18 years of age.
  • Who can invest? – Investments have to be made in the name of your minor kid only. Generally Parent / Guardian / Grandparents / relatives can invest in child gift funds in the name of minor child.
  • Expense Ratio & Exit Load – Do check out the expense ratio and exit loads of these funds.
  • Documentation: KYC documents pertaining to child & investor (parent / guardian) have to be submitted while making new investments. At the time of redemption or when the child becomes ‘Major’, fresh and additional KYC documents need to be submitted.
  • Returns – Compare the returns generated by the Children’s Gift funds with other equity funds. (You may like reading article on  – ‘Best Equity Mutual Funds)

Top & Best Children’s Gift Funds

Below is the list of Children’s Gift funds offered by various AMCs;

  • HDFC Children’s Gift Fund
  • ICICI Prudential Childcare
  • TATA Young Citizens Fund
  • UTI Children Career Plan (CCP)
  • Franklin’s Children’s Asset Plan (CAP)
  • AXIS Children’s Gift Fund

Below are some of the top performing Children’s gift funds based on the past returns.

Top and Best Children's Gift Funds Mutual Funds

Should you invest in Children’s Gift Fund MF Plans?

Most of these child plans were very popular during late 1990’s and in early 2000’s. Axis Mutual Fund is now trying to capitalize on the an old fad by launching new Children’s Gift Fund.

Though these Child MF Schemes have been available in the market for almost two decades, we can say that they have failed to grab the attention of retail investors. The total AUM (Assets Under Management) of all the child schemes is estimated to be around Rs 3,700 crore.

If you are planning to purchase units of any of the above Children’s Gift Funds (or) planning to subscribe to Axis’s Children’s Gift Fund (NFO), kindly consider below points;

  • If you have to secure your child’s future, your first priority should be to buy adequate Life and Health Insurance for self. Some child MF plans may offer Insurance benefit too, you may ignore such plans. Consider buying a good Term Plan and get your family & yourself covered with adequate health cover. Also, it is advisable to avoid Child Insurance Plans.
  • Do not allow emotions to drive your investment decisions. Just because these are called as child plans, do not buy them. Kindly understand the features and analyze the past performances of these funds before buying them. They should also meet your requirements. For example – If you have a two year old kid and are planning for his/her college education, it is prudent to invest in a good diversified equity fund or a mid-cap oriented fund than in a children MF plans.
  • Avoid investing in ‘Dividend‘ option, as your aim is to accumulate sizable corpus for your kid’s education or/and marriage goals. Also, do not invest in ‘Hybrid-debt oriented’ plans for long-term goals.
  • Kindly note that it is difficult to achieve a long-term goal by investing in just one MF Scheme. Your core portfolio should have atleast one diversified equity fund and/or one Mid-cap oriented fund. Though child schemes like HDFC Children’s Gift fund (Investment plan) have outperformed many other balanced or hybrid equity oriented funds, investing in them is optional.
  • You can ignore investing in New Fund Offers like Axis’s recently launched Children’s Gift Fund. New Funds do not have a track record.
  • Investing in Children’s Gift Funds can be cumbersome. The investments have to be made in the name of minor kid only. So KYC documents of both minor kid’s and parent’s have to be submitted while purchasing the units. Again at the time of redemption (or) when the child becomes major, fresh KYC documents have to be submitted.
  • Most of the online distribution platforms may not offer these funds. Thanks to cumbersome KYC documentation. You may have to invest in these funds through an Advisor / MF Agent (or) invest in Direct plans of these schemes by visiting the respective AMC websites only.
  • If you are gifting units to a minor, kindly be aware of the rules and implications related to ‘Gifts’. (You may like reading – ‘Gifts & Income Tax Implications‘)

Planning for your child’s future is very important and it can not be postponed. Create a well diversified and solid investment plan.

(Image courtesy of Sicha Pongjivanich at (References : &

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  • praful says:

    nice article for children’s fund. well written and well explained.

  • Ankita says:

    Dear Sreekanth
    I wish to start investing in mf debt and direct…I have two LICs and i contribute in NPS as i am as tae government employee..I wish to start a SIP I have read ur article plz suggest some good five funds so that i can invest for a better return after three years is ICICi MIP a gud one to invest , I can monthly spare 10-15k

  • Rahul Negi says:

    Dear Sir,

    I have been reading your blogs for last 1 year. I have a 9 month old kid. After gaining knowledge through your blogs i have discarded the idea of opting for “child plans”.
    Currently i am investing in Reliance Tax saver ELSS Growth INR 1500 PM and SBI Blue Chip Growth fund INR 2000 PM. Apart from this i have 100 grams in Sovereign Gold Bond till 2024.
    I am planning to increase the investment through SIP depending on the increase in salary next month along with a term insurance.
    Please suggest.

  • Vilas Mule says:

    Dear Sir,
    I have my younger daughter who is 11 years and5 month old .please suggest which is the best Child plan to invest for lock in another 10 years

  • maya bajpai says:

    Our grandson lives abroad with his parents. Please suggest the most suitable long term investment we can make on his first birthday, which will mature when he is 18/21 years old. We are both above 70, and may not be around when he reaches that age! We already have an HDFC Children’s Double Benefit Plan for our other grandchild, for which we are paying an annual premium. Thank you for your guidance.

  • sreenvivasulu Rodda says:

    Inform me about the Mutual Funds suit for children

  • Manjunatha says:

    What is the Tax Implication of investing in Child MF Plan, let say my Father has some retirement fund instead of gifting to me since i am 30% tax bracket range, can my father start investing money in name of his grand children in Children MF? will that be advantage compared to other non child MF

  • yogendra singh bhadauria says:

    Dear sir, today only I have submitted my application form for hdfc children gift fund for my 4 yr old daughter since my wife was putting pressure on me to buy sukanya s.s. Unfortunate thing is that now only I read your article on relakhs related to the mistake which it seems to be commuted by me. Suggest ….should I discontinue my sip proposal to hdfc child gift fund?

    • Dear yogendra,
      It is a good fund. But there are certain challenges in operating the fund (mentioned in the article).
      From returns point of view, it has been performing well. Also, note that the units are locked till 18 years.
      Balanced funds can be a better option. Example : TATA balanced fund or HDFC balanced fund.
      Also, get yourself adequate life cover.

  • C das says:

    Sir,plz guide me as I have started lic child education plan last 3years as a 28000 primium yearly .now I want to stop and start a sip of 2500 in hdfc child gift fund in my son name for 15 year…is it advisable or not….

  • Dinesh B says:

    dear sir

    please let us know which best child plan. which can we help kindly suggest.


    • Dear Dinesh,
      HDFC Children’s gift Fund (investment plan option) has been performing well.
      But as mentioned in the article, you may first consider investing in a well diversified equity and/or mid-cap oriented fund before investing in a hybrid fund, if your financial goal is >10 years away.

  • feroz says:

    New fund axis children gift fund today

    i invest one time lump amount 1 lakhs after 20 yrs maturity .how much maturity amount min 10 % return ?

    or better SIP invest p/m 2000 for 20 yrs how much maturity? or

    one time invest 1 lakh F.D every months interest transfer to SIP plan

    which profit amount ?

  • drjlbansal says:

    Dear Srikanth,I want to gift children m gift mutual fund to my grandchildren and I purchse units in my name and I die after ten years, before the maturity of fund say 20 years.Will maturity amount of the fund be available to benefeciary.kindly reply.

    • Dear Dr jlbansal,
      Yes it is available to the beneficiary (kid). The minor kid with the help of a guardian can maintain the folio. If kid is a major then he himself can withdraw the fund value (if required).

  • Shailendra says:

    Hi Sreekanth,

    First off all thanks for the enlightening us through your blogs and impeccable knowledge.

    please help me in my financial planing.

    let me give you my background:

    – Salary is 15 LPA and i’m blessed with two daughters(twins 7 months old).

    -16,70,000 loan left on my flat with 30,900 monthly emi.

    – Term insurance of 1 cr for 30 years.

    -PPF 7.5 lakhs from the last 8 years.putting 1.5 lakhs from the day govt. allowed.

    -Wife PPF 7 lakhs from the last 7 years 6 Lakhs.

    -Invested 2,33,000 in SIP for last 1 year in, 1000rs per month
    1- Birla SL Frontline Equity Fund(G)
    2-HDFC Mid-Cap Opportunities Fund(G)
    3- ICICI Pru Multicap Fund-Reg(G)
    4- ICICI Pru Value Discovery Fund-Reg(G)

    1- want to invest for my daughters future (Education / Marriage), planing to invest in Sukanya Samiridhi Yojna.
    2- secure my retirement

    Please advice how should i plan for these items.


  • senthil says:

    Thanks sreekanth.
    Basically it is a Balanced fund, if we compare typical equity oriented balanced fund and child plan equity option which will perform best. Both will have 65% equity and 35% debt. Could you please compare hdfc balanced and hdfc children fund or any other amc’s balanced fund and their child plan.

    Since its a child plan..will the fund manager will take any long term startegies compared to general balanced fund? which will be advantage?

    • Dear Senthil,
      Some balanced funds – equity oriented are bit more aggressive in equity allocation when compared to Child plans -equity oriented. If this is the case then standard balanced funds as a category might outperform the child plans (equity oriented).
      However, HDFC Children’s Gift fund (Investment plan) is an exception.
      You may read my article on ‘Best Balanced funds‘ to have an idea about the past performances of equity oriented balanced funds.
      As discussed in the article, there are some challenges (KYC, gift & tax implications, lock-in etc) with child plans. Personally, if i have to opt for a hybrid fund, I will go with a standard balanced fund like HDFC balanced fund or TATA balanced fund.

  • Raj says:

    I would suggest (and also practicing) to stay away from any products that have children in the name be it Gift Funds, or Child Life Policies.

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