As much as it is exciting to welcome children into your life, it also brings along some anxiety and concerns about their futures. Saving and investing become a top priority to ensure they are adequately provided for and have a secure future. Investing for your children can be done in two ways: either you earmark funds in your own portfolio for them, or you invest in their name for a more focused investment strategy if you think you can’t do it with your account. Investments taken out in the name of your minor children are known as minor investments.

Minor –

Indian Majority Act 1875 defines a minor as someone who has not yet reached the age of 18.

Minor Investment –

In order to invest in the name of your children, you need to follow special procedures that are mainly designed to safeguard their interests.

• As proof of age, you will need to submit their birth certificate.
• The minor’s investments are to be managed by a guardian since they do not have the knowledge to make informed decisions. Parental responsibility means that you will be their natural guardian.
• Documents proving your relationship with the minor.
• Guardians need to submit PAN, bank account details, and Know Your Customer details.
• Payments and receipts will be processed through the guardian’s account.
• Although the guardian’s account is used to pay and receive the funds, the minor is the sole owner.
• Neither a nominee nor a joint holder are allowed on a minor account.
• Upon reaching majority, the children are required to submit their PAN, bank account details, and Know Your Customer information.
• In the future, all financial transactions will be made through the new bank account opened in your children’s name.
• A bank official will attest your children’s signature to replace your signature as a guardian.
• Once the children reach majority, the minor account cannot be operated.

A minor investment can be made in –

• Mutual Funds –

Different funds are designed with a long-term goal in mind for minors. These are usually a combination of equity and debt funds that can be customised to meet the needs of investors. According to the norm, the investor is the minor child with you as guardian.

• Stocks –

Investing in shares can be done by a minor, with the guardian managing the account, trading account, and the bank account. Minor trading accounts are limited to equity delivery investments only. At the age of majority, the current account is closed and a new one is opened with all the shares transferred.

• Public Provident Fund –

PPF rules allow you to have two accounts, one in your name and one in the name of a minor child. Because of the compounding benefits, it is suited to long-term investments, 1.5 lakhs is the maximum investment limit. Upon attaining majority, an application for change can be filed.

• Sukanya Samriddhi Account –

Two accounts can be held by a family for two girls, and when the girl reaches the age of 21, she will be paid.

Alternatively, you can hold the investments in your account and have more control and flexibility to make changes as necessary. Associating the child with a joint holder facility or having them as nominees will allow you to maintain that investment for them.

A variety of investment options are available for minor children, so you can choose one that is most beneficial for the long-term goals you have for them. You should map out a roadmap for your minor child just as you would for any other investment plan. Our team of experienced and award winning  financial planners can assist in helping you start early to ensure your child’s financial stability at an early age.