How to Invest for a Minor Child in India (2025 Guide)

(Smart, Simple & Safe Investment Options for Indian Parents)

Raising a child in India is a journey filled with dreams - dreams of giving them the best education, a stable start in life, or even the freedom to chase their own passions. But let’s face it: dreams are expensive.

Higher education today costs ₹15–20 lakhs and rising. Weddings can go into lakhs. And even helping your child with a startup fund or home loan down payment someday means you'll need a solid financial cushion.

So, what’s the smart move? Start early, even small.
Whether you’re a new parent or have a toddler running around, investing in your child’s name can help you:

• Build a separate goal-based corpus
• Take advantage of long-term compounding
• Teach your child the value of money and planning

Who is a Minor in India (And Why That Matters)

By law, a minor is anyone below 18 years of age. Since they cannot legally operate a bank or investment account, you (as the parent or legal guardian) will open and manage the account on their behalf.

Key points:

• You become the guardian on record
• Your PAN and KYC will be used
• Any income generated is taxed under your income until the child turns 18 (more on that later)

How to Start Investing in Your Child’s Name (Step-by-Step)

1. Choose the Investment Instrument

You can invest in:

• Government schemes (like PPF, Sukanya)
• Mutual Funds via SIPs
• Fixed income products (RDs, FDs)
• Equity via Demat account (for advanced users)

2. Open an Account in Your Child’s Name

You’ll need to submit:

• Child’s birth certificate
• Guardian’s PAN, Aadhaar, and KYC
• Bank details of guardian (or joint)

3. Set a Monthly Investment Plan

Whether it's ₹500 or ₹5,000, start what’s comfortable and increase gradually.

Best Investment Options for Minor Children in India (2025)

1. Public Provident Fund (PPF)

• Government-backed
• Lock-in: 15 years
• Interest: 7.1% p.a. (Q2 FY25-26)
• Tax-free under 80C (EEE status)

Best for parents who want guaranteed, long-term compounding without risk.

Limit: ₹1.5 lakh/year per account (can’t exceed across accounts)

2. Sukanya Samriddhi Yojana (SSY) (For Girl Child)

• Only for girl child below 10 years
• Lock-in till 21 years of age
• Interest: 8.2% p.a. (Q2 FY25-26)
• Tax-free maturity

Start early to lock in high interest. Ideal for future education/marriage goals.

3. Mutual Funds via SIP (Systematic Investment Plan)

• Smart way to beat inflation long-term
• Start with ₹500/month
• Equity Mutual Funds: Suitable for goals 10+ years away (college, startup fund). Expect higher growth with moderate risk.
• Hybrid Mutual Funds: Ideal for 5–10 year goals with a mix of safety and returns.
• Capital gains taxed under guardian's name (before 18)

Choose AMC that supports minor folios (like HDFC, SBI, Axis, etc.)

4. Recurring Deposits (RDs) / Fixed Deposits

• Short-term, low risk
• 1 to 5 year lock-ins
• Interest taxable, lower than equity

5. Minor Demat Account (Equity & ETFs)

• Requires guardian to operate
• Only delivery trades allowed (no intraday or F&O)
• Transitioned fully to child after age 18

Recommended only for experienced investors or those who want early stock exposure.

Quick Comparison:

Here is a table of summary with above discussed options:

Tracking & Rebalancing: What Happens After You Start?

It’s not just about starting. Over the years, your goals may shift, income levels may improve, or markets may perform differently. That’s why it’s important to review your investments once a year and rebalance if needed.

If equity funds have grown faster than others, you might want to shift a portion to safer options. Or if your goal is closer, consider reducing risk by moving to debt or hybrid funds.

SIP Growth Example: How ₹5,000/Month Can Grow Over 18 Years

Even ₹5,000/month becomes ₹30+ lakhs in 18 years.

What About Taxes?

Before Age 18:

• Income from the child’s investments is clubbed with your income
• You pay the tax based on your slab

After Age 18:

• Income is taxed in child’s name
• They likely fall in lower or NIL tax slab

Plan redemption post-18 to benefit from tax savings.

What Happens When Your Child Turns 18?

When your child turns 18:

• You need to submit fresh KYC in their name
• Ownership of investments shifts to the child
• Update bank details and contact info
• Gains are taxed in their ITR

Do this proactively to avoid redemption or freezing issues.

Quick Investment Checklist for Parents

• Birth Certificate of child
• Your PAN + Aadhaar
• Cancelled cheque/passbook
• Minor folio application (with declaration)
• SIP mandate form

FAQs

Q1. Can I invest in PPF or SSY for both kids?
Yes, but SSY is limited to 2 girl children per family (exception: twins/triplets).

Q2. What’s better - PPF or Mutual Funds?
PPF is safer but capped at 7.1%. SIPs can beat inflation with higher risk. Ideally, use both.

Q3. Can I change SIP amount in minor folio?
Yes, you can increase or decrease SIP anytime. Many AMCs allow online change.

Q4. Is gold a good option for kids?
Use SGBs (Sovereign Gold Bonds) or ETFs for safe, tax-efficient gold exposure.

Final Takeaways: Parent to Parent

• Start now, don’t wait for “a better time”
• Even ₹5000/month matters over 15–20 years
• Use a mix: PPF + SIP + SSY (for girl)
• Review once a year - don’t go overboard
• Track tax, maturity timelines, and documents

Want Help Planning for Your Child?

Book a free call with our advisors to build a simple, flexible, and long-term plan for your child’s future.

Start now - your child’s future doesn’t wait.

Sources & References

• PPF Rate - NSI India (7.1% for Q1 FY 2025‑26; unchanged for Q2)
• Public Provident Fund (India) - Ministry of Finance details
• Sukanya Samriddhi Yojana interest rate - 8.2% p.a. (Q1 FY 2025‑26)

Disclaimer: This article is for educational purposes only and does not constitute financial advice. Please consult a SEBI-registered financial advisor before making any investment decisions. Investment products are subject to market risks. Past performance is not indicative of future results.