You love your child and want to invest in his name. You have decided to invest in mutual funds and that's the right decision. If you have been following the highly successful Mutual Funds Sahi Hai campaign, you would have seen this Advertisement on TV.
A man and his friend go for a grand wedding. This man promises his baby girl that he will also celebrate her wedding in grand style. He then asks his friend where to invest money so that his daughter will have a grand wedding when she grows up. He replies...Invest in Mutual Funds...The man says " But, Mutual funds require time to grow". His friend replies, Do you have to marry your daughter tomorrow. I guess you got the message.
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You have gifted your 4 year old son a piggy box. He puts money in this piggy box and you too put some money in this piggy box. Does this money earn any interest? Your parents, friends and relatives gift your son, cash on his Birthday. What do you do with this money? Why not invest in a mutual fund in your minor child's name?
1. Can you invest in a mutual fund in minor child's name?
Yes, you can and you must invest in mutual funds in minor child's name. You are allowed to invest in any mutual fund scheme in your child's name, provided he/she is under 18 years of age. Your child will be the first and sole holder in the mutual fund folio.
There will be no joint holder for the folio. You (parent or your spouse), can be the guardian of the folio or even a court appointed guardian should be fine.
If you want to collect money to provide quality education to your child, you may consider investing in a mutual fund through the SIP route. Systematic Investment Plan popularly called SIP, allows you to invest small sums of money regularly, say once each day, month or fortnight in a mutual fund.
SEE ALSO: Your 2 Minute Guide To SIP
If you invest in a mutual fund in minor child's name, there are some documents you need to provide while opening the mutual fund folio. You would have to provide your child's age proof which can be a copy of the birth certificate or even a passport.
You also have to show proof of relationship with the child (natural or legal guardian). Complete this documentation before opening the mutual fund folio or making the first investment in your child's name.
It is compulsory for you to comply with the KYC before making this investment.
1. Fill the CKYC Form
2. Attach your recent passport size photograph.
3. Submit proof of identity.
4. You need to submit a copy of the PAN Card.
5. Address proof like Passport copy or Aadhaar.
You will have to submit a third party declaration form if the investment is routed through your (parent's) bank account. You can also route these transactions through your child's bank account.
3. What if you are not comfortable investing in your child's name?
The mutual funds are in your child's name and when he is 18 he becomes the owner of these funds. You (parent) no longer have the authority to redeem the mutual fund. Your SIP instructions are valid only till your child turns 18, even if they are perpetual SIPs. You will have to complete your child's KYC formalities and help him make his PAN when he is 18.
What if you are not comfortable investing in your child's name? Just invest in your name and make your child the nominee. You can avoid all the hassles of investing in your minor child's name.
SEE ALSO: How To Link Mutual Funds With Aadhaar?
Yes, you have a duty and responsibility to your child. You have to invest for his/her education and marriage. Why not invest in mutual funds in minor child's name? Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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