Whose Money Is It? What Parents Get Wrong About Investing for Their Kids

Most parents who invest for their children are doing something entirely sensible. They want to provide for the future.

A monthly SIP starts when the child is young. A PPF account gets opened. An insurance policy gets bought. There's always a purpose in mind — university, a first home, maybe a daughter's wedding.

Nobody expects the child to object. The money is being saved for them, after all.

But there's a question most parents never ask at the start: whose money will this legally be once the child grows up?

The education fund that wasn't theirs to control

I've seen this play out. Parents spend years running monthly mutual fund SIPs in their child's name, purpose crystal clear in their own minds — this is for higher education.

The child turns eighteen. Asks for the money.

The parents say no — it's for education. The child disagrees. He wants it for something else.

That's the moment the parents discover what they'd been calling "our savings for his education" was, legally, never theirs to withhold. It was his.

The child was never just a beneficiary

When a mutual fund investment sits in a minor's name, the minor is the unitholder — full stop. The parent operates the folio as guardian while the child is underage. Once the child turns eighteen, that guardianship ends, and the now-adult child takes over the account, subject to the usual formalities.

It doesn't matter that the parent funded every rupee, picked the fund, and ran every SIP with one clear goal in mind. None of that makes the parent the legal owner.

Under the Majority Act, a person becomes a major at eighteen. So when that eighteen-year-old says "I want my money," he isn't asking his parent for a favour. He's asking for property that's already his.

"But I saved it for your education"

This is where intention and legal ownership pull apart.

Picture a father starting a ₹10,000 monthly SIP for his eight-year-old son, aiming squarely at university fees. Ten years on, the investment has grown considerably — and the son wants no part of the course his father had planned. He wants to travel, or start a business, or just buy a car.

The father says: that isn't what I saved it for. He's probably right. But that was never the legal question.

The legal question was always who owns the investment. If it's the son's, the father's intentions about how it should be spent don't give him any continuing say over his son's property.

Most parents never think this through, because they picture their eighteen-year-old as simply an older version of the child they raised. But eighteen is a legal line, not just a birthday — and the person crossing it may have very different plans for the money than the parent who saved it.

Sometimes the tax break is quietly part of the plan

There's another reason parents put money in a child's name, and it's easy to overlook: tax.

A PPF account opened for a minor can let the parent claim a deduction under Section 80C on the contribution, subject to the usual limits. It looks like a clean win — tax relief now, savings for the child later, nobody loses.

Except the tax benefit says nothing about who owns the account. A PPF account in a child's name is the child's account. The parent is only ever the guardian. Claiming the deduction doesn't quietly convert the child's asset into the parent's.

The broader point: the person claiming the tax benefit isn't necessarily the person who owns the asset.

PPF adds one more wrinkle. Ownership and access aren't the same thing — the scheme has its own maturity and withdrawal rules, so turning eighteen doesn't instantly make the whole balance freely withdrawable the way a mutual fund folio might be. None of this makes a child's PPF a bad idea. It just means parents should know exactly what they're setting up before they set it up.

Insurance hides the same trap

Insurance policies create a near-identical problem, though the details shift with the policy.

A parent buys a policy, mentally files it as "my daughter's wedding fund," expects a payout at 21 or 23. But a policy doesn't follow the parent's intention just because that was the reason for buying it.

Who's the policyholder? The life assured? The nominee? Who actually gets the maturity benefit? Does it vest in the child at a set age? Can it be surrendered or assigned? What happens the day she turns eighteen?

The answers vary hugely by policy. Some children's plans spell out vesting and majority rights clearly; others don't touch the question at all. "I bought this for her wedding" tells you the parent's intention. It tells you nothing about who actually controls the money.

The question to ask before you invest, not after

None of this is an argument against investing for your children. It's an argument for doing it on purpose.

Before putting money in a child's name, ask: if my child turns eighteen and wants this money for something completely different from what I planned, am I fine with that?

If yes — invest, and invest knowing exactly what you're creating. If no, don't quietly hope it'll work out. Change the structure instead.

The real objective might not be "I want my child to own this money." It might be "I want to provide for my child, but I want to decide when and how it becomes available." Those are different goals, and they call for different tools — keeping the investment in your own name, a properly structured trust, or an insurance product whose terms actually match what you intend, depending on your situation.

The child you're planning for isn't the adult who'll receive it

Parents plan brilliantly for the child in front of them. They plan less well for the adult that child is going to become.

A five-year-old won't argue with an education fund. A twelve-year-old might love the idea of a wedding fund. An eighteen-year-old may see it all completely differently — and that doesn't make him unreasonable, or make the parent wrong for having saved.

It just means intention and legal entitlement were never the same thing.

So before the next SIP, the next PPF contribution, the next policy — ask whether you've actually given your child the legal right to decide, or just assumed you'd always get to. Sometimes the most expensive mistake in saving for a child isn't saving too little.

It's saving in the wrong name.