K. Aravind
Parents are more interested in investing exclusively in the name of their children than ever before. It is common to open savings accounts in the name of children and to invest in schemes such as PPF and Sukanya Samridhi Yojana.
It has become common practice for parents and close relatives to deposit their gift money into savings accounts instead of piggy banks during birthdays, festivals and high marks.
Mutual funds are an ideal way to invest such savings in savings accounts effectively and with good returns. While interest rates on schemes such as PPF and Sukanya Samridhi Yojana are likely to fall in the future, adopting equity-linked investment options such as mutual funds will help in achieving better returns in the long run.
Mutual funds’ equity schemes are one of the best ways to invest for children, as they are the least suitable for risk-averse equity investing.
The minimum amount that can be deposited in the name of a child in a mutual fund is Rs.500. Underage children can invest in any fund house scheme. The child will be the sole account holder of such deposits. Inclusion of joint account holder is not allowed in such deposits.
The date of birth and age of the child should be recorded at the time of starting the investment. Proof of date of birth of the child and information about the parent should be provided along with it. Birth certificate and passport can be submitted as proof of date of birth.
It is also possible to start investing in the name of a minor through a Systematic Investment Plan (SIP). SIP can only continue until the child reaches adulthood. SIP can only be continued till the age of 18, even if the original application has been submitted with the provision of continuing after attaining the age of 18 years.
Investments can be made in the name of minors through SIP as well as Systematic Transfer Plan (STP). STP is a method of transferring money from a liquid fund to an equity fund every month.
SIP and STP will be discontinued when the child reaches 18 years of age. The fund house notice will be sent to the unit owner shortly before the minor attains the age of majority. To change the status of the folio from Minor to Major, you need to apply with sufficient documents. The house of Funds will send notices in this regard. KYC Acknowledgment Letter should be submitted
