Things to keep in mind while investing in your child’s name

Investing for your child’s future often brings with it several questions – the main one being, should they invest in their name or the in the name of their child? While the decision may vary from parent to parent, the intention to build a sizeable corpus remains the same.

Mutual Funds allow you to invest both ways – in your as well as your child’s name. Here are a few things to keep in mind while investing in your child’s name.

Supporting documents are crucial

Supporting documents related to date of birth is important while investing in a child’s name. You can provide the date of birth certificate, school leaving certificate, or, the minor child’s passport as proof of date of birth.

Remember, minor will be the sole unit holder

If you are investing in the name of your minor child, no one can be the second holder in that account. Only the minor will be the first and the sole unit holder. Also, nomination is not allowed in the folio held by the minor investor.

Limited access to the investment

If you invest in the name of your minor child, you will have limited access to the investment. For instance, if you have opted for a dividend payout option, and the fund declares the dividend, the dividend amount will come to your registered bank account. The ownership of the investment will, however, remain with the minor investor.

Dedicated Investment for your child

As a parent, you surely must have investments for your own goals. But many a times, parents take out money from their long term investment portfolios to meet short term needs that arise due to their child’s needs. However, if you invest specifically for yourself and your child’s goals, you could prevent drawing money from one portfolio and investing in the other, thereby de-cluttering your investment needs.

Your child’s dreams require special attention. Investing in mutual funds, in your child’s name is an intricate process and the above mentioned details could guide you. Mutual Funds could help you plan for your child’s future with ease. It is but vital to know all the basic details about taking a decision and get the most out of your mutual fund investment. You can also engage a financial advisor for better clarity and advice on the same.

The article is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. Investments in mutual funds and secondary markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing. Recipient of this article/ information should understand that statements made herein regarding future prospects may not be realized. He/ She should also understand that any reference to the securities/ sectors in the document is only for illustration purpose and are NOT stock recommendations from the author or L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates. The value of investments and any income from them can go down as well as up.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. CL02259

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