Mutual Fund Investments For Minors

Saving and investment are the most important task to secure the financial future. Investing in mutual funds for your minor child can help you with funds for his or her higher education. You can contribute small amounts such as monetary gifts received on their birthdays, winning a competition, etc.

This can be started with amounts as low as Rs 500. Once your child attains the age of 18, you will require to change the status of the sole account holder from minor to major. If you don't change the status, all the transactions would be stopped in the account. The investment in the mutual fund, made in the name of the minor, cannot be held in joint names. This has to be in the name of the minor only. One important thing to note here is that the guardian in the folio should be either parent or a legal guardian appointed by the court. 

You can even you do a systematic investment plan (SIP) in the name of the minor. The debits for this account can come either from a designated bank account of the parent or child's minor account. 

If you wish to open mutual fund folio for your minor child, you will require two documents. First, age and date of birth proof of the minor. This can be either a birth certificate or a passport. The second important document is your relationship with the child. You can give a birth certificate, passport copy, etc which has your name as a parent. Once your minor attains the age of 18, he or she will have to go through the KYC process in his or her name. The further investments in the same folio of the same fund house, will not require these documents. However, it is mandatory for the guardian to comply with know your customer (KYC) regulations. 

When your child becomes major, all SIPS in the folio will be stopped. The folio will be frozen for operation. Parents or guardian will not be able to operate that account from the date of their child attaining majority. It may be noted that before your child become 18 years old, the fund house will send a notice to the account holder at his or her registered correspondence address. On attaining majority, he or she will have to submit an application with the prescribed documents to change the status of the folio to major from minor. This way you can plan for your child's financial future.