Best Mutual Fund Plans for Children in 2025

For most investors, securing their financial future and generating profits are the main objectives of investing. Many also invest in financial products and assets to safeguard their children’s financial future, besides achieving their own financial goals.

You can help your children build a sizable corpus by making wise financial choices early on. One way to achieve this is by investing in the best mutual fund plans for children. Continue reading to find out more.

Introduction

Invest early for your child’s future to gain peace of mind and create a substantial financial cushion. Planning consistently helps you achieve your financial objectives for tomorrow.

Importance of Early Financial Planning for Children

Starting early maximizes the power of compounding, enabling a modest investment to grow significantly over time. Furthermore, early planning encourages a disciplined saving habit, helping parents to manage future school, marriage, or health-related costs easily. A dedicated corpus guarantees that unforeseen life events do not jeopardize the child’s long-term financial plans.

“Start investing with confidence! Explore the best mutual funds and grow your wealth.”

Role of Mutual Funds in Building a Child’s Financial Corpus

Mutual funds designed for children offer a structured and professionally managed approach to building wealth over time. Parents may reduce risk and increase long-term rewards by investing in a diverse portfolio. With features like lock-in and systematic investing choices, mutual funds provide flexibility and discipline for goal-oriented saving.

Understanding Children’s Mutual Funds

The best mutual fund plans for children serve as tailored investment solutions designed to create a corpus for a child, supported by long-term goals and structured discipline.

What Are Children’s Mutual Funds?

Children’s mutual funds, also known as gift funds or solution-oriented plans, are designed to build wealth over a long period with a required lock-in period. They usually blend stock and debt exposure and change it based on risk and time. These products are long-term savings tools that mature after five years or when the kid turns 18.

Key Features and Benefits

Such funds are structured to provide several features and apparent benefits.

Lock-in Periods

A five-year lock-in period, or until the kid turns 18, fosters financial discipline. It protects the goal of the investment and deters individuals from withdrawing funds prematurely or without much thought, which may impede long-term growth.

Tax Implications

Children’s funds typically focus on equity or hybrid investments, enabling tax-exempt long-term capital gains of up to ₹1 lakh annually. On amounts over this, 10% is taxed without indexation.

Investment Flexibility

SIPs often take precedence over lump-sum investments, offering benefits such as rupee cost averaging and convenience. Ownership and control shift to the child when they reach maturity and become a major.

Top Children’s Mutual Funds in India for 2025

This summary highlights the most discussed best mutual fund plans for children in India.

HDFC Children’s Fund-Regular Plan

HDFC Children’s Fund-Regular Plan was launched in March 2001. The minimum investment required for this plan is ₹100 for the lump sum option and ₹100 for the SIP option.

SBI Magnum Children’s Benefit Fund – Investment Plan

SBI Magnum Children’s Benefit Fund-Investment Plan was launched in September 2020. The minimum investment for investing in SBI Magnum Children’s Benefit Fund-Investment Plan is ₹5,000 for the lump sum option and ₹500 for the SIP option.

ICICI Pru Child Care Fund-Gift Plan

ICICI Prudential launched the Child Care Fund – Gift Plan in 2001 to help parents secure their children’s financial future. This is arguably one of the best mutual fund plans for children, focusing on long-term development and delivering stable returns through a balanced combination of debt and equity investments.

Aditya Birla Sun Life Bal Bhavishya Yojna-Regular Plan

The Aditya Birla Sun Life Bal Bhavishya Yojna, which was launched in February 2019, focuses on long-term wealth creation. This fund is arguably one of the best children’s investment plans for 2025, with holdings in both fixed-income and equity instruments.

Tata Children’s Fund

Tata Children’s Fund-Direct Growth was launched on October 14, 1995. It is an open-ended fund for investment for children having a lock-in of at least 5 years or till the child attains age of majority. You need a minimum lumpsum of ₹500 and minimum SIP of ₹500 to invest in the scheme.

Comparative Analysis of Top Funds

A comparative analysis of the primary children’s funds is provided below, considering risk, fees, performance, and structure.

Performance Metrics

For the three-year period, SBI Magnum Children’s Benefit Fund-Investment Plan has delivered an annualized return of 26.53% for Direct-Growth as of July 30, 2025, according to Value Research. The fund was launched in September 2020; therefore, five-year returns are not considered.

ICICI Prudential Child Care Gift Plan had investment returns of 19.61% for a five-year period, as of July 30, 2025.

HDFC Children’s Fund-Regular Plan returned an annualized 19.35% in the five-year period, as of July 30, 2025.

Aditya Birla Sun Life Bal Bhavishya Yojna-Regular Plan returned an annualized 14.52% for the five-year period, as of July 30, 2025.

Tata Children’s Fund has clocked a CAGR of 22.18% for the five-year period, as of June 30, 2025.

Expense Ratios and AUM

Expense ratios differ across funds. SBI Magnum Children’s Benefit Fund-Investment Plan has an expense ratio of 1.87% as of July 24, 2025. ICICI Prudential Child Care Fund-Gift Plan has an expense ratio of 2.18% as of June 30, 2025. HDFC Children’s Fund has an expense ratio of 1.73% as of June 30, 2025. Aditya Birla Sun Life Bal Bhavishya Yojna-Regular Plan has an expense ratio of 2.15%, as of June 30, 2025. Tata Children’s Fund has an expense ratio of 2.58%.

HDFC Children’s Fund-Regular Plan has assets under management of ₹10,369 crore, as of June 30, 2025. SBI Magnum Children’s Benefit Fund-Investment Plan has an AUM of ₹3,832.86 crore as of June 30, 2025.

ICICI Prudential Child Care has assets under management of ₹1,424 crore. Aditya Birla has an AUM of ₹1,155 crore. Tata Children’s Fund has an AUM of ₹366.78 crore as of July 27, 2025.

Risk Profiles and Asset Allocation

The best mutual fund plans for children typically feature equities alongside debt. ICICI’s Pru Child Care Fund has an equity allocation of 85.86%, which offers great return potential but makes it risky.

SBI Magnum Children’s Benefit Fund-Investment Plan invests 77.72% in equities, zero percent in debt, and 22.28% in cash and cash equivalents. HDFC Children’s Fund-Regular Plan allocates 66.34% of its assets to equity and 31.07% to debt. Aditya Birla Sun Life invests 98.39% of its funds in equity and 1.61% in cash and cash equivalents. Tata Children’s Fund website says at least 80% of its net assets will be invested in equity and equity-related instruments of companies.

Some funds provide no lock-in options for increased liquidity, though they yield slightly lower returns. These funds align with a moderate to aggressive risk profile, which is suitable for long-term goals.

Factors to Consider Before Investing

When evaluating these funds, consider the key factors that will impact the returns. These factors include the fund’s overall appropriateness, investing objectives, time horizon, and risk tolerance.

Investment Horizon and Financial Goals

First, think about how many years it will be until your child needs the funds. For education goals that are at least 10 years away, equity-oriented funds work well; for shorter horizons, a more conservative allocation or debt-heavy schemes prove safer. Defining milestones like university tuition or marriage effectively maps your investment timeline.

Risk Appetite and Fund Selection

Additionally, evaluate your tolerance for volatility. If you feel comfortable riding market ups and downs for potentially higher returns, consider equity-focused funds. Select hybrid or balanced children’s funds that provide steadier, though moderate, growth.

SIP vs. Lump Sum Investments

Lump sums work well for those with a sizable amount, but many recommend SIPs for their ability to average out price levels and promote discipline. SIPs enable you to invest in little sums regularly, which helps with budgeting and emotional decision-making. A lump amount may result in faster corpus development if timed correctly, but it also involves the risk of market timing.

Alternatives to Children’s Mutual Funds

The best mutual fund plans for children offer strong growth potential, but other options are also available. Consider conventional options for stability and diversity, especially if you opt for a more conservative approach.

Sukanya Samriddhi Yojana

The government-backed scheme provides girl children with some of the highest fixed interest rates for minors, ranging from 7% to 8% each year. It provides tax exemption on both contributions under Section 80C and on interest or maturity. The scheme a lengthy lock-in until the girl child turns 21 or marries after 18, whichever comes first.

Public Provident Fund (PPF)

PPF stands as a reliable choice, featuring a 15-year lock-in period, tax-free returns on both interest and maturity, and a commitment that lasts until the child reaches major milestones. Historically, interest rates have stayed around 7–7.5%, lower than equity but more secure. You can deduct contributions up to ₹1.5 lakh under Section 80C.

Fixed Deposits and Other Savings Schemes

Fixed deposits and modest savings plans such as NSCs or recurrent deposits guarantee returns, yet they rarely outpace inflation. Their post-tax actual returns are consistent, although they may fall short of mutual funds over a decade or longer.

Conclusion

The best mutual fund plans for children offer a flexible, goal-oriented, and professionally managed approach to building a financial corpus for your child. They generally outperform conventional methods for long-term savings due to their outstanding multi-year performance, disciplined lock-in, and SIP choices.

Combine mutual fund investments with tax-efficient government plans, such as the SSY or PPF, to create a well-diversified, risk-adjusted portfolio. Investing early and consistently is essential, whether through SIP or a lump sum.

FAQs

What is the minimum investment required for children’s mutual funds?

Many funds permit SIPs starting at ₹100–₹500 per month; lump sum investments typically require ₹5,000 or more, depending on the fund.

Are there any tax benefits associated with these funds?

No. Only investments in Equity-Linked Savings Schemes (ELSS) mutual funds are eligible for tax exemption under Section 80C of the Income Tax Act.

Can I withdraw funds before the lock‑in period ends?

Some funds allow for premature withdrawal, but they often impose an exit load, usually around 3–4% of the redemption value if you withdraw before five years or before the child turns 18.

How do I choose between different children’s mutual funds?

Examine the following essential factors: fund AUM, lock-in type, exit load, asset allocation (equity vs. debt), expense ratio, and historical performance (3- and 5-year CAGR). Align those with your investing horizon and risk tolerance.

Is it better to invest via SIP or lump sum for my child’s future?

To achieve regular budgeting and mitigate risks, consider SIP for its advantages in rupee cost averaging and maintaining discipline. A lump sum works well if you have a surplus and the market timing looks good—but it comes with higher short-term risk.

How do children’s mutual funds compare to traditional savings schemes?

The best mutual fund plans for children typically deliver higher inflation-adjusted returns over long periods, while schemes like FDs, PPFs, or SSY provide stability but offer lower growth potential. A combined strategy that includes both offers a balance.

What happens to the investment if the child becomes a major before the lock‑in period ends?

The guardian transfers ownership to the child when the child turns 18, completes the necessary KYC, and manages the funds directly. Lock-in terms still apply, but access options expand.

Can I switch between different children’s mutual funds?

Yes, you can switch between mutual fund houses or funds, but watch out for exit fees if you transfer before the lock-in period expires. Switching can reset the investment horizon in some plans.