Children’s Mutual Funds Boom 160% in 5 Years: Can Returns Beat Education Inflation?

The cost of higher education in India has been rising at a rapid pace, often growing by 11–12% every year. For many parents, traditional savings options like fixed deposits are no longer enough to meet future education needs. This has pushed families to look at market-linked products that offer higher long-term growth.

One such option gaining strong traction is children’s mutual funds.

Why Are Children’s Mutual Funds Becoming Popular in India?

Children’s mutual funds have seen a sharp rise in popularity over the past five years. Assets Under Management (AUM) in this category grew by around 160%, reaching ₹25,675 crore as of November 2025, up from ₹9,866 crore in November 2020.

The number of investor folios also increased from 29 lakh to 32 lakh, showing steady participation from parents planning long-term goals for their children.

How Many Children’s Mutual Funds Are Available in India?

At present, there are 12 children-focused mutual fund schemes in India. These funds usually invest in a mix of equity and debt and come with a mandatory lock-in of five years or until the child turns 18, whichever is earlier.

Returns That Aim to Beat Education Inflation

Over the years, children’s mutual funds have delivered competitive returns. As of November 2025, category average returns stood at around:

Some schemes have delivered significantly higher long-term returns, helping investors stay ahead of rising education expenses.

Top Children’s Mutual Funds by 5-Year Performance

Here are the leading schemes based on 5-year CAGR as of November 2025:

While short-term returns can fluctuate due to market volatility, long-term performance has remained relatively strong across most schemes.

Why Parents Are Choosing These Funds?

Children’s mutual funds offer 3 key benefits:

• Growth potential through equity exposure
• Disciplined investing due to lock-in periods
• Goal-based planning tailored for education or future expenses

As financial awareness improves and digital investing becomes easier, these funds are increasingly seen as a structured way to plan for children’s futures.

Read more: Savings vs BSBD Accounts: Which One Should You Use After RBI’s New Rules?

Conclusion

The sharp rise in children’s mutual fund AUM reflects changing investor behaviour. With education costs climbing steadily, parents are moving beyond traditional savings to long-term investment solutions. While these funds carry market risk, they may suit investors with a long horizon, clear goals, and the ability to stay invested through market cycles.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.