Children’s Mutual Fund AUM Doubles, Surpasses Rs 20,000 Crore Milestone

Among the greatest gifts parents can give their children is the assurance of financial stability. This includes not only meeting their immediate needs but also laying a solid financial foundation that supports their aspirations and goals throughout life. One of the most effective ways to achieve this is by developing a comprehensive financial plan that includes provisions for a good education and sustained support until they attain financial independence.

Importance of Financial Planning for Children

Developing a financial plan for children is crucial, especially as educational expenses continue to rise. Indian parents take this responsibility seriously, as evidenced by the significant growth in the Assets Under Management (AUM) of children’s mutual funds. In the last five years, the AUM of these funds has more than doubled, surpassing the milestone of Rs 20,000 crore for the first time in May 2024.

Rapid Growth in Children’s Mutual Funds

The AUM of children’s mutual funds reached Rs 20,081 crore last month, compared to Rs 8,286 crore in May 2019. This represents a remarkable year-on-year increase of 31% from Rs 15,375 crore in May 2023. These returns are significantly higher than the interest rates offered by SBI fixed deposits during the same period, which were 6.80% and 6.75%.

Performance of Top Children’s Mutual Funds

Here are the one-year gains of some prominent children’s mutual funds:

Addressing Education Inflation

The surge in education inflation, estimated at close to 11-12% (almost twice the country’s inflation rate), is prompting more parents to explore suitable investment avenues to fund their children’s education. The attractive rate of returns and growing awareness among parents about mutual fund investments are contributing to the increase in AUM of these funds.

Benefits of Investing in Children’s Mutual Funds

Children’s mutual funds typically come with a lock-in period of five years or more. This not only encourages a disciplined approach to investing and saving but also discourages premature withdrawals. The exposure to both equity and debt provides diversification, which helps mitigate the risk associated with individual stock pricing and maximizes returns. Additionally, the ownership of the investment can be easily transferred to the child once they reach adulthood.

Leading Fund: HDFC Children’s Gift Fund

HDFC Children’s Gift Fund is a major player in this sector, accounting for a little over 50% of the total AUM of children’s funds. As of the end of May, this fund had an AUM of Rs 9,019 crore.

In conclusion, securing a child’s future through well-planned financial investments is a wise and invaluable gift. With the rising costs of education, exploring and investing in children’s mutual funds can provide the financial stability needed to support their dreams and aspirations.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.