About Children's Mutual Funds
A Children's Fund is an investment scheme tailored to address specific financial needs related to a child, such as education, higher education, healthcare, and marriage. These funds typically come with a mandatory lock-in period of 5 years or until the child reaches adulthood, whichever comes first.
Similar to other solution-oriented mutual funds, these funds are also poised as a solution to the rising costs of education and other future expenses. These investments aim to generate returns over time, which are distributed to investors as regular dividends, all while offering the potential for long-term capital gains. Returns are generated through capital appreciation and, if opted for, income distribution, depending on the scheme structure.
How Do Children's Mutual Funds Work?
Children's mutual funds are solution-focused investment plans in which a parent or legal guardian makes investments on the minor's behalf. Until the child turns 18, the parent serves as the guardian and the investment is made in the child's name.
Depending on the scheme's goal, the fund may invest in two types of children's funds based on their investment horizon and goals:
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Equity-focused funds: Allocate 60% or more to equity and equity-related instruments. These may offer higher growth potential but carry higher market risk.
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Debt-focused funds: Allocate 60% or more to debt instruments. These aim for relatively stable returns with lower volatility.
Typically, these schemes have a five-year lock-in period, or until the child turns eighteen, whichever comes first. The kid gains control of the investment once they reach adulthood and finish the KYC requirements.
Top 8 Children's Mutual Funds to Invest in 2026
| Fund Name | AUM (₹ Cr) | CAGR 3Y (%) | Absolute Returns – 1Y (%)\ |
| SBI Children's Fund – Investment Plan | 5,175.56 | 23.54 | 17.33 |
| ICICI Pru Children's Fund | 1,377.86 | 19.50 | 15.01 |
| Aditya Birla SL Bal Bhavishya Yojna | 1,170.48 | 16.57 | 17.85 |
| Axis Children's Fund – Compulsory Lock-in | 898.21 | 12.31 | 11.96 |
| Axis Children's Fund – No Lock-in | 898.21 | 12.48 | 12.00 |
| Tata Children's Fund | 349.20 | 12.83 | 8.37 |
| SBI Children's Fund – Savings Plan | 132.18 | 12.85 | 7.73 |
| LIC MF Children’s Fund | 14.76 | 11.82 | 7.09 |
Note: The above data is as of February 2026
SBI Children's Fund – Investment Plan
This fund aims to create long-term wealth for children’s future needs such as education and marriage by investing mainly in equities, along with some debt allocation. The fund is managed by SBI Mutual Fund’s fund management team. The expense ratio is 0.81%.
ICICI Pru Children's Fund
ICICI Pru Children’s Fund focuses on long-term capital growth by investing in a diversified portfolio of equities and related instruments, with the goal of supporting a child’s long-term financial goals. It is managed by ICICI Prudential Mutual Fund’s fund management team. The expense ratio is 1.41%.
Aditya Birla SL Bal Bhavishya Yojna
This fund aims to provide long-term growth by investing in equity and debt instruments to help build a corpus for a child’s future financial needs. It is managed by Aditya Birla Sun Life Mutual Fund’s fund management team. The expense ratio is 1.06%.
Axis Children's Fund – Compulsory Lock-in
This scheme is designed to build wealth for children’s long-term goals through equity-oriented investing and comes with a compulsory lock-in period. It is managed by Axis Mutual Fund’s fund management team. The expense ratio is 1.39%.
Axis Children's Fund – No Lock-in
This variant follows a similar long-term goal-based investment strategy but does not have a compulsory lock-in. It aims for long-term capital appreciation through equity investments. It is managed by Axis Mutual Fund’s fund management team. The expense ratio is 1.39%.
Tata Children's Fund
Tata Children’s Fund aims to generate long-term capital appreciation by investing across equity and debt instruments, helping investors build a future-focused corpus for children. It is managed by Tata Mutual Fund’s fund management team. The expense ratio is 1.99%.
SBI Children's Fund – Savings Plan
This fund is more conservative compared to the investment plan and aims to provide stable returns through higher debt allocation, while still supporting long-term child-related financial planning. It is managed by SBI Mutual Fund’s fund management team. The expense ratio is 0.85%.
LIC MF Children’s Fund
LIC MF Children’s Fund aims to build long-term wealth for children’s goals through a mix of equity and debt investments, depending on the fund’s strategy. It is managed by LIC Mutual Fund’s fund management team. The expense ratio is 1.63%.
How to Decide if Children’s Mutual Funds is Right for You
Children’s Mutual Funds are ideally suitable for:
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Legal guardians or parents of minors: Individuals who wish to accumulate a certain corpus for a child's future educational costs or other long-term objectives.
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Long-term oriented investors: Individuals who are able to maintain their investments for a minimum of five years because of the lock-in requirement.
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Investors with a clear objective: Individuals looking for a structured investment for a child that is connected to a certain financial goal.
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Investors comfortable with market risk: Since returns depend on market performance, these funds are suited to those who understand equity and debt market risks.
How To Invest In Children's Mutual Funds?
Investing in a Children's Mutual Fund through your Angel One account is a straightforward process. Just follow these uncomplicated steps:
Step 1: Sign in to your Angel One account.
Step 2: Choose a Children's Mutual Fund that aligns with your financial goals and risk tolerance. You can find detailed information about each Children's Mutual Fund on the Angel One app. Here's what to consider:
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Search for the specific fund you wish to invest in.
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Assess the fund's historical performance, tax implications, and its investment in various sectors and companies. You can also estimate potential returns using the calculator.
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Evaluate the fund's risk level, ratings, and expense ratio.
Step 3: After finalising the Children's Mutual Fund(s) you want to invest in, log in to your Angel One account, navigate to the Mutual Funds section, and locate your chosen fund. Then, decide whether you want to invest through a Systematic Investment Plan (SIP) or make a one-time investment.
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If you opt for SIP, select your preferred monthly SIP date.
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Next, input the amount you intend to invest and choose your preferred payment method.
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For SIP investments, you can set up an AutoPay for effortless future contributions.
By following these simple steps, you can seamlessly invest in a Children's Mutual Fund through your Angel One account.
Features of Children's Mutual Funds
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Solution-oriented structure: Children’s Mutual Funds are categorised by SEBI as solution-oriented schemes designed to build a corpus for a minor’s long-term financial goals.
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Mandatory lock-in: These schemes have a lock-in period of 5 years or until the child attains 18 years of age, whichever is earlier. Redemptions are not permitted during this period.
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Asset allocation options: Schemes may be equity-oriented (60% or more in equities) or debt-oriented (60% or more in debt instruments), depending on the fund mandate.
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Minor-held investment: The investment is made in the child’s name, with a parent or legal guardian managing it until the child turns 18 and completes KYC formalities.
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Expense ratio and exit load: These funds charge an expense ratio as per SEBI regulations. Exit load, if applicable, varies by scheme and is disclosed in the Scheme Information Document (SID).
Advantages of Investing in Children's Mutual Funds
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Customised child investment plans: Tailor-made investment options designed to help ensure financial stability for the kids.
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Goal-based investing: It helps create a dedicated corpus for a child’s long-term financial needs, such as education or other future expenses.
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Mix of debt and equity: Range of child-specific schemes that offer a blend of debt and equity-based investments, allowing you to invest as per your financial goals and risk tolerance.
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Tax benefits: Long-Term Capital Gains (LTCG) of up to ₹1.25 lakhs are exempt from taxation, so you can minimise your tax liabilities.
Factors To Consider Before Investing In Children's Mutual Funds
When it comes to planning for your child's future, children's mutual funds can be an excellent investment choice. However, before you jump into investing in these funds, there are some essential factors to keep in mind:
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Investment Goals: Children's funds cater to various financial goals at different stages of your child's life. They allow you to create a well-diversified investment portfolio tailored to your needs.
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Investment Duration: Children's funds typically come with a mandatory lock-in period of five years. Parents or guardians can extend this duration until the child reaches 18 years. Be aware of this lock-in period and the associated penalties before choosing a fund.
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Returns and Performance: Past performance is not a guarantee of future returns, but it's still important to analyse a fund's historical performance. Look for consistency in generating significant returns and outperforming benchmark indices across different market cycles.
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Exit Load: Children's mutual funds often have high exit loads, especially if you withdraw prematurely. These charges can be as high as 4%. Always consider the exit load before making an investment.
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Documentation: There's a fair amount of paperwork involved in investing in children's funds. Parents or guardians will need to provide official documents to establish their relationship with the child. Additional documents related to the child may be necessary during redemption.
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Lock-in Period: Keep in mind that the mandatory lock-in period of 5 years is in place to reduce the impact of market volatility on your investment. Be prepared for this before you invest.
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Cost of Children's Funds: Children's funds come with expenses, which are primarily the expense ratio and the exit load. The expense ratio covers various costs, such as transaction fees, fund management charges, and distribution costs.
On the other hand, the exit load is a penalty for premature withdrawals. The expense ratio is a necessary cost, while the exit load can be avoided by staying invested until the lock-in period ends. Be sure to factor in these expenses when considering children's funds.
Taxability Of Children's Mutual Funds
Children's mutual funds do not receive any extra tax breaks and are subject to the same tax requirements as other mutual funds in India. If the investment is made in the name of a minor, the income is combined with that of the parent whose total income is higher, according to Section 64(1A) of the Income Tax Act of 1961. Section 10(32) allows for a ₹1,500 exemption per child per year on the parents' combined income.
Tax treatment is based on the scheme's asset allocation. For example:
1. Equities-oriented funds (at least 65% invested in equities or equity-related instruments):
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Short-term capital gains (holding periods of up to a year) are taxed at 20%.
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Long-term capital gains (above ₹1.25 lakh) are taxed at 12.5% per year.
2. Debt-oriented funds (with less than 65% invested in equity):
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Capital gains are taxed at the investor's appropriate income tax slab rate, regardless of holding term, under the current tax laws for debt mutual funds.
Children's mutual funds are not automatically qualified for a deduction under Section 80C unless the scheme fits expressly under an acceptable tax-saving category as specified by the Income Tax Act.
