How to Save for Your Child's Education Using Mutual Funds? The Complete Guide for Parents 2026

Here’s why parents wondering how to save for their child’s education in India may consider mutual funds:

• They may be suitable for long-term goals, as higher education is often many years away.
• They offer market-linked growth potential, although returns and invested amount are not at all guaranteed.
• There are different mutual fund categories to suit varying investment horizons and risk appetites.
• Mutual funds are managed by professional fund managers.
• You can invest through SIPs or lump-sum investments, depending on your financial situation and preference.
• Most open-ended mutual funds offer relatively easy liquidity, allowing investors to redeem units when needed.

If you are a parent who wants to use mutual funds for your child’s education in 2026 and doesn’t know where to begin, here is a simple step-by-step guide that might help:

Step 1: Calculate the Target Education Corpus

Before you start saving for your child's education, estimate how much the course is likely to cost by the time your child is ready for higher studies. This gives you a clear savings target to work towards. 

To estimate this amount, consider the following things:

• The course your child may wish to pursue (MBA, engineering, medicine, etc.).
• Whether the education will be in India or abroad.
• The current cost of similar courses (preferably at target institutions).

After this, you’ll arrive at a rough figure. However, if your child’s higher education is still 7-10 years away, inflation will not keep the degree’s cost flat. Therefore, don’t forget to inflate the estimated education cost by ~7%-10% annually (based on the number of years left for the goal) to reach the proper estimate figure. 
 

Step 2: Identify the Timeline for the Goal

The next step on how to save for your child’s education in India is to figure out how many years you have until the corpus is needed. Your child's current age and the age at which they are expected to start higher education will help you estimate this timeline.

This timeline will help you determine two key things:

• How much you need to save or invest regularly to reach the target sum.
• Which mutual funds may be appropriate based on your investment horizon and risk appetite.
   

Step 3: Choose Suitable Mutual Fund Schemes

Choosing suitable mutual fund options is an important part of education corpus planning. Here’s a reference guide you may consider:

*Disclaimer: The information above is for educational purposes only and should not be construed as investment advice or a recommendation.

**Note on children’s mutual fund schemes: SEBI's February 2026 circular proposed discontinuing children's mutual funds and the introduction of lifecycle funds. However, as per the revised March 2026 circular, AMCs may choose to continue existing children's funds. If they do so, they cannot launch 20-year lifecycle funds. They are still permitted to launch 5, 10, 15, 25, and 30-year tenure options. 
 

Whichever fund type you choose, don’t forget to assess schemes based on factors like:

• Risk level
• Investment objective
• Fund manager’s experience
• Past performance (past performance doesn’t guarantee future returns)
• Expense ratio
   

Step 4: Start an SIP or Invest a Lump-Sum

If you already have a mutual fund account, log into it and search your shortlisted MF scheme. Now, you have to decide if you want to start SIPs for your child’s education or wish to invest via lump-sum. 

For most salaried parents, SIPs for their child’s education may be the preferred option. This allows them to invest a small amount monthly over the years. SIPs may also help average the cost of investment over time and tackle short-term volatility. Plus, you can always invest lump-sum windfalls like yearly bonus from time to time. 

But how much should you set aside monthly for your child’s education fund mutual fund? You can figure out the appropriate SIP amount using a SIP calculator tool online.
 

Step 5: Review and Adjust As Needed

Even after you start investing, your work isn't over. Since your child's education goal may be several years away, reviewing your portfolio periodically can help you check whether you're on track to meet your target or if you need to rebalance.

Plus, as you get closer to your child’s higher education goal, you may consider gradually shifting a portion of your corpus to relatively lower-volatility options, such as debt mutual funds. This may help reduce the impact of short-term market fluctuations before the money is needed. 

1. Understand child’s mutual funds properly

If you are considering a solution-oriented children’s mutual fund scheme (that’s still being offered), you should remember these key points:

• Lock-in window: Your investment will be locked in for 5 years or until the child turns 18, whichever happens first.
• Taxation: Your child will be responsible for taxes only after they turn 18. Before that, any realised gains will be taxed to you as per the provision of the Income Tax Act from time to time. 
• Risk: The level of risk can vary depending on the scheme’s portfolio composition.
   

2. Investing in your name vs. opening a minor account

When you choose to use mutual funds for your child’s education, you may invest in your own name or open a minor account. Here’s what you need to consider:

Investing in mutual funds for your child’s education may be a suitable option if you want market-linked growth potential and can handle volatility and risks. For education corpus planning using MFs, all you need to do is:

• Estimate the future cost of the educational degree/course your child wants to pursue.
• See how many years you have to save.
• Choose mutual fund schemes based on your timeline and risk appetite.
• Start SIP or invest with a lump-sum amount and review periodically.
• Rebalance towards relatively safer debt funds or other assets as you get closer to the goal.

With these simple steps to guide you, you can plan your child’s higher education more easily. 

1. Investing in children’s fund vs. own name: Which is better?

That depends on your preferences. Investing in your own name gives you more flexibility and control. Investing in a minor’s name may attach more emotional value to the SIP and may help ensure better discipline.

However, minor accounts involve more paperwork as parents need to prove their relationship to the child and guardians need a court letter. Plus, once the child reaches 18 years of age, fresh KYC has to be done.
 

2. Is investing in equity funds good for a child’s education planning in India?

Using equity funds for a child's education planning may be suitable if the goal is still 7–10 years or more away. This longer investment horizon may give your investment time to manage short-term market fluctuations while seeking long-term growth potential. However, equity funds are market-linked and do not guarantee any returns nor amount invested.
 

3. Can investing in a child’s name offer better tax savings?

Investing in a child’s name may offer better tax savings if the gains are redeemed when the child turns 18. When the child turns 18, capital gains will be taxed in the hands of the child. Since 18-year-olds generally do not have a source of income, they may automatically fall in a lower tax bracket than their parents, meaning potential tax savings. But this may only apply to debt fund investments that are taxed at slab rates. Please consult your tax advisor for the tax implications.