Why children’s mutual funds are gaining popularity among Indian households
Children’s mutual funds, once a niche investment option, are increasingly becoming a mainstream tool for long-term financial planning in Indian households, especially for education-related goals. Data from ICRA Analytics shows that assets under management (AUM) in children’s funds have surged by nearl y 160 per cent over the past five years, rising to Rs. 25,675 crore in November 2025 from Rs. 9,866 crore in November 2020. This sharp growth reflects changing investor behaviour as families seek solutions that can keep pace with rapidly rising education costs.
Private school fees are increasing at an annual rate of 11–12 per cent, while higher education inflation has exceeded general inflation for over a decade. Traditional instruments such as fixed deposits and recurring deposits are increasingly seen as inadequate to meet these long-term costs. In contrast, market-linked children’s funds have delivered stronger returns, with top-performing schemes generating 20–30 per cent CAGR over the last three to five years.
According to ICRA Analytics, around a dozen such funds are currently available, with several delivering average returns of 15–20 per cent in recent years. This has encouraged parents to shift from conventional savings to equity-oriented, goal-based investment strategies for their children’s future milestones.
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