Want to invest for your child? Here's what every parent must know

Parents wanting to invest for their children's future need to understand the rules. This article explains how to invest in a minor child's name.

Parents planning for their children's future

Parents used to save for their children's weddings. Now, with education costs soaring, investing in a child's name is crucial. It ensures the funds are used for the intended purpose.

Can you invest in a minor's name?

Minors under 18 can't directly hold investment accounts. Specific procedures must be followed when investing for them.

Guardian required

A guardian is needed to manage investments for minors. Parents are usually the natural guardians, but a court-appointed guardian is required otherwise. The minor retains ownership.

Birth certificate

A birth certificate, proof of relationship with the guardian, guardian's bank details, PAN, and KYC documents are needed. The account is in the minor's name, not a joint account, and can't have nominees.

What to do when they turn 18

When the minor turns 18, their PAN and KYC are needed. The account signature is updated, and future transactions are done through their own registered bank account.

Sukanya Samriddhi Yojana

This popular scheme allows investment for up to two minor daughters below 10. The returns are designed for education and marriage. Other options include stocks, funds, and gold.

Gold

Invest in gold bonds instead of jewelry. Sovereign Gold Bonds (SGB) are an option, applied for by the guardian. Gold ETFs and gold savings funds are also available.

Can minors invest in stocks?

Minors can invest in stocks via a guardian. A 3-in-1 account can be opened. Only delivery-based equity investments are allowed, not intraday or derivatives trading. A new account is opened when the minor turns 18.

Mutual Funds

Minors can invest in mutual funds with a guardian. Documents like birth certificate, school ID, or passport are needed. Specific procedures apply if the guardian changes.

Public Provident Fund (PPF)

A PPF account can be opened for a minor. The maximum investment is ₹1.5 lakh per year. Withdrawals must be specified for the minor's benefit. A form is needed when the minor turns 18.

Invest according to your needs

Consider risk tolerance and time horizon. Stocks and equity funds are suitable for long-term goals (10-15+ years). Gold bonds and large-cap funds are good for medium-term goals (5-8 years). Debt funds are best for short-term goals (under 5 years).