Investing for kids - Minor Folio

Our kids hold a very special place in our lives. The lives of the parents revolve around their kids. Parents take all efforts to make the future of their children secure and bright. Whether it be material needs, emotional needs, or financial needs, parents ensure that all these are met with their available resources.


A lot of parents start planning for the financial needs of their kids from quite early on. Be it financing for kid's higher education or their marriage, parents plan for these expenses years in advance. And when it comes to investing for the future, there is no better alternative than mutual funds. Not many people are aware of the fact that they can invest in the name of their minor children in mutual funds. This way they can segregate the money from their overall investment corpus which can be used to meet the child's financial needs when she reaches different life stages. Many parents invest in their own names and try to create mental segregation but there are some disadvantages to this approach:
  • The mental segregation can lead to confusion as the amount invested for the child isn't readily separable from the total portfolio.
  • The amount set aside by mental division is more prone to redemption during emergencies vs the amount in a separate folio in the name of the child.
  • The child may not be interested in the tracking of the investment if the investment doesn't reflect her name.
  • In the case of more than one child, it becomes even more difficult to allocate funds for each child mentally.
  • If the parents decide to shift the units in the name of the child post the child attaining majority, it may lead to tax implications as shifting of units can only be done by redeeming the money and investing in the name of the child.

To avoid all these problems it is advisable to invest in a minor folio i.e. in the name of your child. You must be wondering as to how is a minor folio created and who is the authorized signatory of a minor folio. Let's try to answer all these queries.


  • Minor folio is the one that is opened in the name of your child who is below 18 years of age.
  • In a minor folio, either of the parents acts as a guardian and has all the signing rights until the child reaches the age of 18 years. The PAN number of the parent is the PAN number reflected in the folio.
  • It is mandatory to open a bank account in the name of the minor in order to invest for your child.
  • The only document required to invest in the name of the minor is the date of birth proof of the minor (Aadhar, Passport, Birth Certificate) and KYC of the parent/guardian.
  • The folio can be operated just like any other folio.
  • Once the child reaches the age of 18 then the folio needs to be converted into a normal one by submitting KYC for the minor which is a fairly simple process.
There is no bar on the investment in a minor folio. The parents can invest, withdraw, switch the money as per their choice. Both modes of investment i.e. SIP and lumpsum are available under minor folios.

Investing in the name of minors is gathering pace with more and more parents getting aware of the benefits of investing specifically for their kids as well as making their children financially educated from a very young age. Investing in a product that promises ultimate growth, in the long run, is the best gift that parents can give to their children. And why not start planning for this gift on the occasion of DAUGHTER'S DAY? So, pick your phone up and call us right away on +91-8568953926 or write to us on finriseinvestment@gmail.com & start investing for a bright future of your children.

Comments

  1. Unknown28 September 2020 at 09:26

    Very informative. Ricky always provide detailed information

    ReplyDelete

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