You Can Now Invest in Direct MFs for Your Kid. Here's How

From online registration to the transition at 18—rules, paperwork and key steps, explained

- Anil Poste

For parents looking to build long-term wealth for their children, mutual funds can be a powerful tool. Investing in your child's name can help instill financial discipline early, harness the power of compounding, and ensure that funds are earmarked specifically for their goals, from education to marriage and beyond.

Many parents wish to invest in direct mutual funds online on behalf of their children, but few asset management companies offer this facility and registrar and transfer agent (RTA) websites don't support online investing for minors. As a result, parents often end up taking the offline route, visiting a bank or a mutual fund distributor. However, this process can be cumbersome and time-consuming. Luckily, there is a way to invest in direct mutual funds online in your child's name using Mutual Fund Utilities (MFU), a free, industry-owned portal.

Who can be the guardian?

According to Monali Chitnis, vice president and head of operations at MFU India, the guardian of a minor applicant can either be a biological parent or a court-appointed guardian. "Biological parents need to submit relationship proof, while legal guardian must provide a court order appointing her/him," she said. Importantly, only one individual can be registered as the guardian in a minor's account.

How to get started

The process starts with obtaining a common account number (CAN). Chitnis said: "CAN creation for minor applicants is completely digital and is registered instantly, if the required information and documents are in order."

• Visit www.mfuonline.com and navigate to 'eCAN Registration' section.

• Enter email ID and phone number; select 'New Form'. Choose the mode of registration as 'Electronic'.

To invest in direct plans, leave ARN/RIA field blank.

• Under account type, select 'Single' for mode of holding, and 'Minor' for investor category/tax status.