If you’re thinking about starting a SIP for your child, there are a few important things to consider. Many parents begin saving early for their child’s future, and if you’re planning to set up a mutual fund SIP, here are some key points to keep in mind.
What are the guidelines for opening a SIP in a child’s name?
Starting a SIP for your child is pretty straightforward. Most mutual funds allow you to open a SIP in a child’s name, and there’s no cap on how much you can invest. Just remember that the child must be the sole owner of the portfolio.
You can also set up a 3-in-1 account (which includes banking, trading, and demat) in your child’s name. Additionally, kids under 18 can invest in the stock market, but the parents will need to take responsibility for those investments.
What documents do you need?
1. To start a mutual fund in your child’s name, you’ll need to provide some essential documents. First, you’ll need to show proof of age, which can be a birth certificate or a passport.
2. You’ll also need to clarify your relationship with the child. Plus, parents must comply with KYC regulations.
3. Since the money will be deducted from the parent’s account until the child turns 18, you’ll need to fill out a third-party declaration form.
4. Parents must submit their important documents, such as bank details and PAN card.
5. Keep in mind that you cannot add a nominee to this account.
What happens when your child turns 18?
If you’ve set up a mutual fund SIP for your child, be aware that it will cease once they turn 18 or reach adulthood. When that happens, the fund house will send a notice to the registered address of the unit holder, along with the necessary documents confirming the transition from minor to adult.
What’s a Mutual Fund SIP?
SIP stands for Systematic Investment Plan. It allows you to invest in mutual funds in smaller, manageable amounts over time. Plus, you get to choose how much you want to invest and when you want to make those investments.
