How to Start an SIP for Your Child
You can invest in mutual funds for a child who is under 18. The process involves a parent or legal guardian, a minor folio and a few important documents. Here's how to get started.
First, decide whose name the investment should be in
There are two broad routes. You can open a mutual fund folio in the child's name, with a parent or court-appointed legal guardian operating it. Or you can invest through your own folio and earmark the money for the child's future.
Route 1: Invest in the child's name
The minor is the sole unit holder. A joint holding with the parent is not permitted in a minor's folio. The parent or court-appointed legal guardian acts as guardian until the child becomes an adult and completes the required status change.
Route 2: Invest in the parent's name
You can start an SIP in your own mutual fund folio and plan to use the investment for your child's future. The investment remains legally in your name, and you retain control over it. It does not automatically become the child's asset. This route avoids the minor-to-major folio conversion process, but ownership and eventual transfer need to be considered as part of your family and estate planning.
Documents to keep ready for a minor folio
Requirements vary by AMC and platform. Check the current checklist before applying. Commonly requested information includes:
- Child: name, date of birth and proof such as a birth certificate, passport or accepted school document; PAN details where required by the AMC's process; and bank account details for redemption proceeds.
- Parent or legal guardian: PAN and completed KYC; identity and address details; proof of relationship where requested; or court appointment documentation for a court-appointed guardian.
- Banking: account details and the payment mandate accepted by the AMC or platform.
Step 1: Arrange the child's PAN and bank account
A minor can have a PAN, with a parent or legal guardian applying as representative assessee. If you need help, read How to Get a PAN Card for a Minor Child in India.
You can also ask a bank about opening a minor savings account. Banks set their own account-opening and operating requirements, so check the chosen bank's current document list and rules for how the account can be operated.
A child's bank account is important because redemption proceeds from a minor's mutual fund folio must be paid to the minor's verified bank account, including an eligible joint account with the guardian where permitted.
Step 2: Complete the guardian's KYC
The parent or legal guardian opening the minor folio must complete KYC. If your KYC is already completed, check that your details remain current and that the AMC can verify your status.
Whether the minor must separately complete KYC at the time of investment can depend on the AMC's process and applicable requirements. Follow the instructions of the specific mutual fund house rather than assuming every AMC follows the same online flow.
Step 3: Choose an investment route
- AMC website: Visit the mutual fund house's official website and look for its process to invest on behalf of a minor. Confirm that online minor-folio opening and SIP registration are supported.
- MFU: Mutual Fund Utilities offers a common transaction platform for participating mutual funds. Check its current CAN registration process and confirm that the relevant minor-investor onboarding and transaction facility is available for your case. You can review the MFU CAN registration forms and instructions.
- AMFI-registered mutual fund distributor: A distributor can help you understand the documentation and application process. You should still review the scheme information and understand the risks before investing.
Step 4: Open the minor folio
- Enter the child's details as the investor and the parent's or legal guardian's details as guardian.
- Submit the child's date-of-birth proof and relationship or guardianship evidence requested.
- Provide the required PAN and KYC details.
- Add the child's verified bank account for redemption proceeds.
- Complete the AMC's declarations, verification and application process.
The minor is the sole unit holder. The guardian is authorised to operate the folio on the child's behalf while the child is a minor.
Step 5: Register the SIP
Once the folio is accepted and the AMC's process allows transactions, select the scheme and complete the SIP registration. You will generally need to choose the amount, frequency, instalment date and an accepted payment mandate.
SEBI's framework permits the investment amount to be paid from the minor's bank account, the parent or legal guardian's bank account, or a qualifying joint account with the parent or legal guardian. Redemption proceeds, however, must be credited to the minor's verified bank account.
Confirm the exact mandate and payment steps with the AMC or platform. A platform may have additional operational checks.
What happens when your child turns 18?
Plan for this well before the birthday. When the minor becomes a major, the guardian's authority to operate the folio ends. The child must complete KYC in their own capacity and submit the AMC's prescribed minor-attaining-majority request, updated bank details and other required documents.
Until the status change is completed, transactions and existing standing instructions, including SIPs, are restricted or suspended under the applicable process. The child should contact the AMC or its registrar to complete the conversion and confirm when transactions can resume.
Which route should you choose?
| Invest in child's name | Invest in parent's name |
|---|---|
| Child is the sole unit holder. | Parent remains the unit holder. |
| Guardian operates the folio while the child is a minor. | Parent operates the folio. |
| Redemption goes to the child's verified bank account. | Redemption goes to the parent's registered bank account. |
| Minor-to-major status update is required at 18. | No minor-to-major conversion is needed for that folio. |
Tax treatment can differ depending on whose name the investment is held in and the source and nature of the income. Income arising to a minor child may be subject to applicable clubbing provisions, subject to statutory exceptions. Tax rules can change; consult a qualified tax professional for your circumstances.
A final thought
Start with the goal you are investing for, decide who should own the investment, and then follow the relevant AMC or platform process. An SIP is a way to invest regularly; it does not guarantee returns or remove market risk. Review the plan as your child's needs and the time available to the goal change.
Need further information?
Every family's financial goals are different. If you would like to understand your options or need help getting started, get in touch with Pecuniam.
Write to us at hello@kiddo.money and our team will be happy to help.
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