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Why Children's Mutual Funds Surged 21%: Parents Battle Soaring Education Costs

Children's mutual funds in India have seen impressive growth, with assets skyrocketing over the last five years. This surge is largely fueled by parents seeking better returns to keep pace with rapidly increasing education expenses. These funds offer a mix of equity and debt, along with a lock-in period that encourages disciplined, long-term saving. With strong historical performance and growing financial awareness, this category is poised to become a mainstream choice for family financial planning.

Key Points: Children's Mutual Funds Grow 21% in 5 Years Amid Rising Education Costs

  • Assets under management surged 160% over five years to reach ₹25,675 crore
  • The number of investor folios increased to approximately 32 lakhs from 29 lakhs
  • Top-performing funds delivered an average CAGR of 15-20% over three-to-five years
  • Rising education costs, increasing 11-12% annually, are a primary growth driver
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Children's mutual funds grow 21 pc in 5 years driven by rising education costs

Children's mutual fund AUM jumps 160% to ₹25,675 crore as education costs rise 12% yearly. Discover the growth drivers and top-performing funds.

"Parents increasingly prefer these funds because they combine equity and debt exposure, offer superior returns compared to traditional options like fixed deposits, and enforce a lock-in period... promoting long-term savings.” - Ashwini Kumar, ICRA Analytics"

New Delhi, Dec 15

The Children’s mutual fund category has recorded strong growth of around 21.08 per cent in the last 5 years and is expected to register double‑digit expansion in the coming years, a report showed on Monday.

The report from ICRA Analytics said that the growth will be driven by the rising cost of education, which has been increasing by 11–12 percent annually. Further, the superior returns generated by these funds are driving parents toward market-linked instruments for long-term planning,

The assets under management (AUM) of children’s mutual funds rose 160 per cent over five years to Rs 25,675 crore in November, 2025 up from Rs 9,866 crore five years earlier.

The number of folios climbed to about 32 lakhs in November, 2025 from roughly 29 lakhs five years ago.

There are 12 such funds currently available in the market, while the top-performing funds have delivered an average CAGR of 15-20 percent in the last three-to-five years, it noted.

The fund ranked first in the category delivered 34.35 per cent in 5 years, 22.85 per cent in 3 years and 10.89 per cent in last one year.

"Parents increasingly prefer these funds because they combine equity and debt exposure, offer superior returns compared to traditional options like fixed deposits,

and enforce a lock-in period of five years or until the child turns 18, promoting long-term savings,” Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, said.

“The growth outlook for the Children’s Mutual Fund category in India is highly promising, supported by strong historical performance and evolving investor preferences,” Kumar said.

Average returns stood at around 4 per cent for one year, 14 per cent for three years and 17 per cent for five years.

Investors are expecting the mutual fund industry to grow at a 10–18 per cent CAGR through 2033, while this category is poised to become a mainstream choice for goal-based investing, offering disciplined savings, tax benefits, and superior returns compared to traditional options, the report said.

Greater financial awareness, digital penetration, and regulatory support for solution-oriented schemes will further strengthen adoption.

- IANS

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Reader Comments

A
Arjun K
While the returns look good, I think we should be cautious. The report mentions "average returns" but the top fund delivered 34% and the average is 17% for 5 years. That's a huge variance. Not all funds will perform the same. Do your own research and maybe consult a financial advisor before jumping in.
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Rohit P
Education costs are insane now. A decent engineering college can cost upwards of 20 lakhs. Traditional FDs just can't keep up with 11-12% inflation in education. This shift to market-linked instruments is a natural, smart move by Indian parents. Jai ho for financial awareness!
S
Sarah B
Interesting to see this trend in India. The concept is similar to 529 plans in the US. The lock-in feature is key—it prevents parents from using the money for other purposes. Hope the regulatory framework keeps investor protection strong as this category grows.
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Vikram M
My father saved for my education in a PPF. It was safe but returns were modest. For my daughter, I'm using one of these funds. The digital platforms make it so easy to track and invest monthly. It feels good to be building a proper corpus for her future.
K
Kavya N
A word of respect for the older generation though. They managed with FDs, gold, and land. These new instruments are great, but let's not forget the foundational saving habits they instilled in us. This is an evolution of that same desire to secure our children's future. 🙏

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