MFs to PPF: How to start off your newborn’s investment journey

livemint.com:

₹2,500 and ₹10,000. Parents or guardian can invest in a minor’s MF account through their own banks. However, the redemption proceeds will only be transferred to the minor’s bank account.

To open a MF account, the child’s birth certificate needs to be produced to establish age and relationship with the parent or legal guardian. Along with this, a cancelled cheque of the child or parent’s bank account has to be submitted. Mumbai-based Sneha Jain, 36, has created separate bank accounts for her six-and-half-year-old daughter and four-year-old son.

Since her children were six months, she has been investing in MFs, which are held in their names. For each child, she makes monthly investments of ₹30,000 through systematic investment plans (SIPs), from their bank accounts. Jain, a wealth manager, says she wants to stick to MFs for the long-term goals of her children.

“I have opted for equity funds – a multi-cap and a children’s fund – for each child. Equity funds tend to do well over longer periods as impact of market-linked volatility evens out over longer time frames," she says. The children’s fund comes with a high exit load, which deters parents from making any early redemptions.

Jain also invests ₹5,000 every month in Sukanya Samriddhi Yojana (SSY) for her daughter. A SSY account can be opened any time after the birth of a girl child till she turns 10 years old. The account can be opened with minimum investment of ₹250, and a maximum of ₹1.5 lakh can be deposited in it in a financial year.

The government recently hiked the interest rate on SSY deposits to 8.2% from 8%. An SSY account can be opened at a bank or any post office. The parents need to submit birth certificate of the child and their own KYC (know your customer)