Know the pros and cons of investing in your child's name

Parents get tax benefits on the profits earned from long-term investments in such accounts

- Aprajita Sharma

When should you start planning for the children’s future? Immediately after childbirth, say some people. It should be earlier, say others. Pune-based Harshil Majithia started early. Majithia (30), who works with Netmeds, reached out to his financial planner during the first trimester of his wife’s pregnancy, to start investing for the child’s future. “I got the birth certificate of my daughter ready within a week of her birth to open a bank account in her name. Within 45 days, we also got her PAN, Aadhaar and passport created. We decided to invest in her name in diversified mutual funds and gold for her education and wedding needs," says Majithia.

Noida-based Sameeksha Srivastava (34), too, opened a bank account in her daughter’s name right after her birth and made a lump sum investment in the Sukanya Samriddhi Yojana (SSY), a government scheme designed for girl children. The SSY account can be opened either at a bank or post office. The scheme allows you to avail tax deduction for investments up to ₹1.5 lakh under section 80C of the Income Tax Act. “We also bought a term plan, started a systemic investment plan (SIP) in mutual funds (MFs) and invested in gold monetization schemes with jewellers. The SIP, though, was started with our bank accounts," she says.

Child accounts

Opening a bank account in a child’s name is not really necessary unless the parents intend to make investments in that account, say experts. There are advantages in doing that, they add.

Since a person below the age of 18 is a minor, a bank account can only be opened along with one of the parents as the joint account holder.