- Summary
- SBI Children’s Benefit Fund – Investment Plan recorded the highest 3-year and 5-year CAGR among the funds in the comparison, at 21.22% and 21.48%, respectively.
- HDFC Children’s Fund stands out for its large asset base of around ₹10,575 crore and its 65–80% allocation to equity and equity-related instruments.
- UTI Children’s Hybrid Fund has a relatively lower equity allocation, with up to 40% in equity, making its portfolio less equity-heavy than UTI’s Children’s Equity Fund.
- LIC MF Children’s Fund has a much smaller AUM of around ₹16 crore compared with most other funds in the list, which investors may want to consider alongside its performance and portfolio.
- Expense ratio, AUM, asset allocation, benchmark performance, risk and the time remaining before the education goal should also be evaluated.
A Children’s Fund is a mutual fund scheme designed around long-term financial goals for children, such as higher education, professional courses or other major future expenses. These schemes have traditionally been classified by the mutual fund industry as solution-oriented. Planning for a child’s higher education requires investing well in advance because education costs can increase considerably over time. Mutual funds can be used to build this corpus through SIPs or lump-sum investments, depending on the parent’s financial capacity and investment horizon.
Best 10 Mutual Funds for Children’s Education: Quick Comparison
Choosing a mutual fund for a child’s education requires looking beyond recent returns. Factors such as investment horizon, equity exposure, lock-in period, expense ratio, AUM and performance against the benchmark can help parents compare schemes more effectively. The table below provides a quick snapshot of 10 children-oriented mutual fund schemes, based on the selected parameters, as of 9 September 2026.
| Fund name | Category/ Plan | 3 YR CAGR % | 5 YR CAGR % | Benchmark 5 yr Return % | AUM in ₹ crores | Expense Ratio % | Minimum SIP in ₹ | Risk |
| Aditya Birla Sun Life Bal Bhavishya Yojna Fund | Direct Growth | 11.29 | 10.09 | 10.41 | 1,243 | 0.81 | 500 | High Risk |
| HDFC Childrens Fund | Direct | 8.6 | 10.62 | 8.91 | 10,575 | 1.02 | 100 | High Risk |
| ICICI Prudential Children’s Fund | Direct | 12.46 | 12.15 | 10.73 | 1,434 | 2.26 | 100 | High Risk |
| SBI Children’s Benefit Fund Investment | Direct Growth | 21.22 | 21.48 | 10.24 | 7,310 | 1.12 | 500 | High Risk |
| UTI Children’s Equity Fund | Direct Growth | 7.29 | 7.04 | 8.32 | 1,133 | 1.23 | 500 | High Risk |
| Axis Children’s Lock-in Fund | Direct Growth | 8.81 | 6.72 | 7.46 | 906 | 1.46 | 1000 | High Risk |
| UTI Children’s Hybrid Fund | Direct | 6.52 | 6.68 | 8.04 | 4,391 | 1.47 | 500 | Moderate to High Risk |
| Axis Children’s No Lock-in Fund | Direct Growth | 8.93 | 6.88 | 7.46 | 906 | 1.46 | _ | High Risk |
| TATA Children’s Fund After 7 Years | Direct Growth | 4.35 | 6.7 | 12.53 | 331 | 1.84 | 500 | High Risk |
| LIC MF Children’s Fund | Direct Growth | 9.55 | 8.52 | 10.15 | 16 | 1.64 | 200 | High Risk |
Top 10 Mutual Funds for Children’s Education in India
The following list compares 10 mutual fund schemes that have been designed or positioned for children’s long-term financial goals. However, investors should check the current status and availability of each scheme before investing, particularly in light of changes to mutual fund scheme categorisation in 2026. Past returns should also not be treated as an indication of future performance.
1. Aditya Birla Sun Life Bal Bhavishya Yojna Fund
Aditya Birla Sun Life Bal Bhavishya Yojna Fund is a solution-oriented children’s scheme designed for long-term goals such as education and other future expenses. Its appeal lies in giving investors a dedicated vehicle for a child’s financial goals rather than mixing the corpus with other household investments.
Strength: The fund is for long-term children’s financial goals, making it suitable for an investor who is seeking a goal-based investment structure.
Weakness: Equity exposure means the corpus can experience significant market fluctuations, particularly during periods of market stress.
2. HDFC Childrens Fund
HDFC Asset Management Company’s HDFC Children’s Fund invests predominantly in equities, with the AMC stating that 65–80% of assets are invested in equity and equity-related instruments, while the balance goes into debt and money-market instruments. The scheme has a lock-in of at least five years or until the child turns 18, whichever is earlier.
Strength: The 65–80% equity allocation gives the fund a clear growth orientation, which can work well for long-term education or other child-related goals.
Weakness: The fund is classified as high risk, so parents should be prepared for substantial fluctuations in the corpus.
3. ICICI Prudential Children’s Fund
ICICI Prudential Children’s Gift Fund is designed to meet long-term financial needs for children. Its solution-oriented design makes it more appropriate for investors who can remain invested for a longer period, rather than for those seeking a flexible short-term investment.
Strength: The fund allows a defined investment portfolio for children’s long-term goals, helping investors maintain goal discipline.
Weakness: Market-linked returns mean there is no assured corpus for a future education or marriage expense.
4. SBI Children’s Benefit Fund Investment
The scheme formerly known as SBI Magnum Children’s Benefit Fund – Investment Plan is now presented by SBI Mutual Fund as SBI Children’s Fund – Investment Plan. It is the equity-oriented option in SBI’s children’s fund offering. SBI states that the Investment Plan can invest 65–100% in equities, follows a multicap approach, and can also invest up to 20% in gold and up to 35% in foreign securities at the fund manager’s discretion.
Strength: SBI also allows the scheme to use gold and overseas securities, potentially adding diversification beyond Indian equities.
Weakness: The high equity allocation makes this the higher-risk option within SBI’s children’s-fund structure.
5. UTI Children’s Equity Fund
UTI Children’s Equity Fund is the equity-oriented option under UTI’s children’s-career fund structure. UTI states that the scheme invests above 70% in equity and equity-related instruments, with the remainder in debt instruments. It has a minimum five-year or age-18 lock-in.
Strength: The scheme uses the Nifty 500 TRI as its benchmark, providing a broad-market reference for performance evaluation.
Weakness: Investors with a short time horizon may not have enough time to recover from an equity market correction before the money is needed.
6. Axis Children’s Lock-In Fund
Axis Children’s Lock-in Fund is designed specifically for investing on behalf of children, with the compulsory lock-in structure intended to keep the money earmarked for the child’s future. Axis documents describe it as an investment in equity/equity-related securities as well as debt and money-market instruments.
Strength: They have benchmarked the scheme against a hybrid index, allowing a combination of both growth and fixed-income exposure.
Weakness: Hybrid exposure can reduce equity-market sensitivity compared with a pure equity fund, but it does not eliminate market risk.
7. UTI Children’s Hybrid Fund
UTI Children’s Hybrid Fund is the more conservative counterpart to UTI Children’s Equity Fund. UTI states that it can invest up to 40% in equities, with the remainder primarily in debt instruments. The scheme has existed since 1993.
Strength: The maximum 40% equity allocation makes it considerably less equity-heavy than UTI Children’s Equity Fund.
Weakness: The lower equity allocation can also mean lower long-term growth potential compared with an equity-oriented children’s fund.
8. Axis Children No Lock-In Fund
The No Lock-in option of the Axis Children’s Fund provides the same exposure to children’s-goal orientation without the compulsory lock-in associated with the other version. Their records show separate No Lock-in and Compulsory Lock-in variants, including direct and regular plans.
Strength: The biggest advantage is greater liquidity compared with the compulsory-lock-in version.
Weakness: The absence of a lock-in can also be a behavioural disadvantage, as investors may withdraw funds before the child’s actual goal is reached.
9. TATA Children’s Fund After 7 Years
Tata Children’s Fund – After 7 Years is designed for investors with a longer time horizon before they need the money for their child’s financial goals. The seven-year orientation makes it particularly relevant to parents who are planning well in advance for higher education or other major expenses.
Strength: A longer investment horizon gives the equity component more time to ride through market cycles and compound.
Weakness: The longer commitment reduces flexibility for investors whose financial circumstances change.
10. LIC MF Children’s Fund
LIC MF Children’s Fund is an open-ended children’s scheme with a lock-in of at least five years or until the child reaches majority, whichever is earlier. LIC MF says the fund seeks capital appreciation through equity and equity-related securities, while also investing in debt and money market instruments to generate relatively stable income.
Strength: Its combination of equity and fixed-income exposure makes it different from a pure equity children’s fund.
Weakness: The fund remains market-linked, so the debt component does not eliminate the risk of losses.
How We Selected These Mutual Funds for Children’s Education
The Mutual Funds for children’s education are selected based on the given factors.
- Assets Under Management (AUM): AUM represents the total value of money invested and managed by a fund. We considered funds with a substantial asset base across different investment categories.
- Lock-in and goal discipline: Children’s funds generally have a predefined lock-in period. This should be taken into consideration because it may help prevent premature withdrawals and keep the investment aligned with the intended goal.
- Expense Ratio: The expense ratio represents the yearly cost of managing the fund. A lower ratio can help investors keep a larger share of their investment returns over time.
- Portfolio diversification: We also considered whether the funds spread investments across different market segments and asset classes. SBI’s Investment Plan, for example, follows a multicap strategy and can also invest in foreign securities and gold within specified limits.
Mutual Fund for Children Education vs Other Fund Categories
The differences between Mutual Fund for Children Education and other funds are outlined below.
| Basis | Mutual Fund for Children Education | Retirement Fund | Index Fund |
| Purpose | Designed for long-term goals such as a child’s education | Building a retirement corpus | Long-term wealth creation by tracking an index |
| Investment | Can invest in equity, debt or a combination, depending on the scheme | May invest in equity, debt or a combination of both | Invests in securities that make up a chosen market index |
| Suitable for | Parents planning for a child’s long-term financial goal | Investors building wealth for their post-retirement years | Investors seeking a simple, low-cost way to participate in the market |
| Benefits | Helps align investing with a specific child-related goal | Focuses investing around a long-term retirement goal | Simple structure and typically lower costs than actively managed equity funds |
Benefits and Risks of Mutual Fund for Children’s Education
The benefits of mutual funds for children’s education are given below.
- Potential for long-term wealth creation: Equity-oriented mutual funds can provide higher growth potential over a long investment horizon, which can help parents build a larger education corpus through compounding.
- Diversification: Mutual funds invest across several securities. Depending on the scheme, the portfolio may be diversified across companies, sectors and even asset classes, reducing the concentration on a single investment.
- Goal-based investing: Children’s mutual funds are specifically structured around long-term child-related goals. This can help parents keep the investment separate from their regular savings and maintain focus on the education goal.
The risks associated with mutual funds for children’s education are given below.
- Market risk: Equity-oriented funds can experience substantial fluctuations during market downturns. If the market falls shortly before the education expense is due, the accumulated corpus could be lower than expected.
- Inflation risk: Education costs can rise significantly over time. A fund may generate positive returns but still fail to keep pace with the increase in education expenses if the returns are insufficient.
- Lock-in risk: Children’s mutual funds may have a minimum lock-in of a certain period. This can restrict access to funds when an unexpected financial need arises.
Who Should Consider and Avoid Mutual Funds for Children’s Education?
The wide range of schemes means they can cater to investors with different goals, investment horizons and risk levels. However, the right fund depends on factors such as market volatility, expected returns, liquidity needs and an investor’s ability to take risk.
Investors who should consider investing in a Mutual Fund for Children’s Education are given below.
- Parents with a long investment horizon: Those who have 7–10 years or more before the education expense can consider equity-oriented funds because they have more time to withstand market fluctuations.
- Investors comfortable with market fluctuations: Mutual funds do not provide assured returns. Parents who can tolerate temporary declines in their investment value may consider an equity-oriented scheme.
- Parents looking for goal-based investing: Children’s Funds can suit investors who want a separate investment specifically earmarked for their child’s education and other future requirements.
Investors who should not choose a Mutual Fund for Children’s Education are given below.
- Parents needing the money in the near term: If college fees are due within the next one or two years, taking substantial equity exposure can be risky because a market correction could reduce the corpus just when it is needed.
- Investors uncomfortable with lock-ins: Children’s Funds generally have a minimum lock-in of five years or until the child turns 18, whichever is earlier. Investors who may need frequent access to their money should carefully consider this restriction.
- Parents with no emergency savings: Education investments should not replace an emergency fund. Families without adequate financial reserves may need liquidity before committing money to a locked-in children’s scheme.
How to Choose a Mutual Fund for Children’s Education
Choosing a mutual fund for a child’s education should depend on the time left until the education goal, risk level, asset allocation and investment costs, rather than simply selecting the fund with the highest recent return.
- Identify the investment goal: Decide whether the investment is for wealth creation, retirement, children’s education, a short-term requirement or another financial objective. The goal determines the type of SBI fund that may be appropriate.
- Compare equity exposure: Check how much of the fund is invested in equity, debt and other assets. For example, HDFC Children’s Fund states that it invests 65–80% in equity and equity-related instruments, while UTI Children’s Hybrid Fund can invest up to 40% in equity.
- Understand the lock-in and withdrawal rules: Some traditional children’s schemes have specific lock-in conditions linked to the investment period or the child’s age. Investors should understand these restrictions before committing money that may be needed earlier.
- Match the risk with the goal: A fund with high equity exposure may suit a goal that is many years away but can be unsuitable when college fees are due soon. The investment should be reviewed as the goal approaches.
SIP vs Lump Sum for Mutual Fund for Children Education
The difference between SIP and lump sum for Mutual Fund for Children Education is outlined below.
| Basis | SIP | Lump Sum |
| Meaning | Invest a fixed amount in a fund regularly, typically monthly. | Invest a large amount in the fund at one time. |
| Suitable for | Investors who earn regularly and want to build their investment over time. | Investors who already have a larger amount available to invest. |
| Amount | A smaller amount and increase it over time. | A larger amount to be available upfront. |
| Market Timing | Money is invested at different market levels, so the investments do not depend on one entry point | The return can be more affected by the market level when they invest. |
Direct vs Regular Mutual Fund for Children Education
The difference between direct and regular Mutual Fund for Children Education is given below.
| Basis | Direct Mutual Fund for Children Education | Regular Mutual Fund for Children Education |
| Meaning | Invest directly with the mutual fund/AMC without a distributor | Invest through a mutual fund distributor or intermediary. |
| Charges | Usually lower because no distributor commission is included. | Usually higher because the expense ratio includes distributor-related costs. |
| Suitable for | Investors who can research funds and manage their investments themselves. | Investors who want help from a distributor while selecting and managing funds. |
| Returns | Can achieve slightly better returns over time due to lower expenses. | Returns may be slightly lower due to the higher expense ratio. |
Taxation of Mutual Fund for Children Education
The taxation of Mutual Fund for Children Education depends on the type and holding period of the funds, according to the Income Tax Act, 2025.
For Equity Mutual Funds
- Short-term Capital Gain: When the investment is redeemed within less than one year or 12 months, it is considered short-term capital gains and is taxed at 20%.
- Long-Term Capital Gain: When the investment is redeemed after 12 months, it is considered long-term capital gains and is taxed at a rate of 12.5% on the total income, with an exemption up to ₹1.25 lakhs.
For Specified Mutual Funds
- For specified mutual funds, any capital gains arising from the redemption of debt mutual funds under specified funds are referred to as short-term capital gains, irrespective of their holding period and are taxed as per the applicable income tax slab. They are measured as per the Income-Tax Act, on or after 1st April 2023
Other Best Mutual Funds Categories
Investors can check other Stockgro blogs, including those on various mutual funds.
FAQs
Based on the 5-year CAGR figures as of 9 September 2026, SBI Children’s Benefit Fund – Investment Plan, ICICI Prudential Children’s Fund, HDFC Children’s Fund, Aditya Birla Sun Life Bal Bhavishya Yojna Fund and LIC MF Children’s Fund are among the better performers in the selected list.
It can be considered when the investment horizon is long, and the parent is comfortable with market-linked returns. However, investors should first check whether the specific children’s scheme is currently open to fresh investment, as SEBI discontinued the Solution Oriented Schemes category in February 2026.
In the comparison provided in this article, SBI Children’s Benefit Fund – Investment Plan has the highest 3-year and 5-year CAGR among the listed children’s funds. However, a fund should not be considered the best solely because of its past returns.
Start with the financial goal and investment horizon. Then compare the fund’s asset allocation, risk, historical performance against its benchmark, expense ratio, portfolio diversification and current investment status. The fund should match the goal rather than simply having the highest recent return.
These investments may suit parents who have several years before the education expense, can tolerate market fluctuations and want to build a separate corpus for a long-term goal. Parents approaching the education date should be more cautious about taking high equity exposure.
SBI Children’s Benefit Fund – Investment Plan delivered a 1-year return of 16.76% based on the data considered for this article. The fund is designed for long-term children’s financial goals and follows an equity-oriented investment strategy.
No. Mutual funds are market-linked investments and do not guarantee the amount available when the child needs the money. Equity-oriented schemes can experience significant short-term losses during market declines.
There is no single market level that is ideal for every investor. Parents with a long investment horizon may consider investing gradually through SIPs, while those with a near-term education requirement should generally avoid taking excessive equity risk.
An FD generally offers more predictable returns, while a mutual fund can provide greater growth potential but also carries market risk. The choice depends on the investment horizon, return expectations, liquidity needs and risk tolerance.
