Raising a child in India is full of hopes and plans. You dream of giving them a strong education, financial security, and the freedom to follow their passions. But alongside these dreams comes a reality check. Every milestone costs money, and those costs are rising faster than most salaries.
- Why Start Investing for Your Child Early
- Who Is Considered a Minor in India
- How Minor Investment Accounts Work
- What Happens When the Child Turns 18
- Mutual Funds via SIP for Child Wealth Planning
- Why SIPs Work Well for Long-Term Goals
- Taxation Rules You Should Know
- Can ₹10,000 a Month Really Become ₹1 Crore?
- Where Can ₹1 Crore Help Your Child
- How to Start Investing Today
- Common Mistakes Parents Should Avoid
- Conclusion
- FAQs
A good college education today can easily cost ₹15 to ₹20 lakh. A wedding may require several lakhs more. Even helping your child with a home down payment or startup idea needs careful planning. Waiting until the last minute often leads to stress and compromises.
The good news is this. You do not need to earn a fortune to give your child a strong financial foundation. You simply need to start early and stay consistent. With the right planning, your child can have ₹1 crore by the age of 20. This is not wishful thinking. It is the result of disciplined investing and the power of compounding.
Why Start Investing for Your Child Early
Time is the biggest advantage a parent has. When you invest over a long period, even small monthly amounts can grow into a large corpus.
Starting early helps you:
- Build a dedicated, goal-based corpus for your child
- Beat inflation over the long term
- Reduce pressure on your future income
- Teach your child the importance of saving and planning
When you invest from the early years, your money gets more time to grow. Compounding works best when it is given time, not when rushed.
Who Is Considered a Minor in India
In India, any individual below the age of 18 is legally classified as a minor. Since minors cannot enter into legal contracts, they are not permitted to independently operate bank accounts or make investment decisions on their own.
To enable savings and investments for children, parents or legal guardians are allowed to open and manage accounts on the minor’s behalf. These are commonly referred to as minor accounts or minor folios in mutual funds.
How Minor Investment Accounts Work
In a minor mutual fund account, the child is the sole holder of the investment, while the parent or legal guardian acts as the authorised operator. The guardian manages contributions, redemptions, and other transactions until the child reaches adulthood.
To open a minor account, proof of the child’s age is mandatory. Accepted documents typically include a birth certificate, passport, or other government-issued age proof. In addition, the guardian must complete full KYC requirements.
(Source: SEBI)
What Happens When the Child Turns 18
Once the child attains the age of 18, the account must be updated to major status. This involves completing fresh KYC for the child and submitting a formal request to the mutual fund or platform. Until this process is completed, the account may be temporarily restricted from transactions.
It is important to note that until the account is converted, taxation, documentation, and overall control of the investment remain with the guardian. Timely conversion ensures uninterrupted access and smooth ownership transfer to the child.
(Source: SEBI)
Mutual Funds via SIP for Child Wealth Planning
One of the most effective ways to invest for your child is through mutual funds using a Systematic Investment Plan, commonly known as SIP.
A SIP allows you to invest a fixed amount every month. This removes the need to time the market and helps build discipline.
Why SIPs Work Well for Long-Term Goals
- Small monthly investments add up over time
- Rupee cost averaging reduces market volatility risk
- Compounding boosts long-term wealth creation
- Easy to start, modify, or pause
(Source: ICICI Bank)
Taxation Rules You Should Know
When investing in a minor’s name, taxation works slightly differently.
- Capital gains are taxed under the guardian’s income
- Equity mutual funds attract long-term capital gains tax after one year
- Under income tax rules, income up to ₹1,500 per year per child is exempt from clubbing with the guardian’s income
- The basic exemption and tax rules of the guardian apply
- Once your child turns 18, taxation shifts to their name after account conversion
(Source: Cleartax)
Can ₹10,000 a Month Really Become ₹1 Crore?
Yes, and the math supports it. Let us look at a simple SIP calculation assuming a long-term average return of 15 percent per year.
SIP Calculation Example
| Details | Amount |
|---|---|
| Monthly SIP | ₹10,000 |
| Investment Period | 20 years |
| Total Invested Amount | ₹24,00,000 |
| Estimated Returns | ₹1,27,59,550 |
| Total Corpus | ₹1,51,59,550 |
Note: This return assumption is illustrative and based on long-term equity market behaviour. Actual returns may vary depending on market conditions.
This shows how consistent investing over time can turn a relatively modest monthly amount into a sizeable corpus. Even if returns vary, the potential remains significant due to the long investment horizon.
(Source: Paytm Money SIP Calculator)
Where Can ₹1 Crore Help Your Child
A ₹1 crore corpus opens multiple possibilities for your child.
- Higher education in India or abroad
- Seed capital for a business or startup
- Down payment for a first home
- Financial independence at a young age
More importantly, it gives your child choices. Financial freedom early in life reduces stress and allows them to make decisions based on passion rather than pressure.
How to Start Investing Today
Starting is simpler than you may think.
- Choose a mutual fund that allows minor investments
- Complete KYC for yourself and your child
- Select the SIP amount and investment date
- Stay consistent and review annually
Avoid frequent switching or reacting to short-term market movements. Long-term investing rewards patience.
(Source: ICICI Bank)
Common Mistakes Parents Should Avoid
- Delaying investments thinking there is plenty of time
- Stopping SIPs during market downturns
- Choosing products with low growth for long-term goals
- Mixing child goals with regular household savings
Keeping your child’s investments separate ensures clarity and discipline.
Conclusion
Giving your child a ₹1 crore corpus by age 20 is not about earning more. It is about planning better. By starting early, investing regularly, and staying invested for the long term, you allow compounding to do the heavy lifting.
A monthly SIP of ₹10,000, started today, can create a powerful financial foundation for your child’s future. The earlier you begin, the lighter the burden becomes later. Your child’s future self will thank you for the decision you make today. Equity-oriented SIPs, when chosen carefully and held patiently, can play a key role in long-term child wealth planning.
Disclaimer: Investment in the securities market is subject to market risks. Read all the related documents carefully before investing. This content is purely for information purpose only and in no way is to be considered as an advice or recommendation. The securities are quoted as an example and not as a recommendation. Investors are requested to do their own due diligence before investing.
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