How to Open a Trading Account for Minor?

Individuals below the age group of 18 years in India are considered to be minors. To open a Minor Trading Account in India, it has to be done by the parents (biological mother and father) or a legal guardian in the name of the minor.

Benefits of Opening a Minor Trading Account

Opening a Minor Demat and Trading account can be extremely beneficial for the future of a child. It can help to plan the finances from a very early age. As parents can invest in equity, the account can be used to ensure some finances for future education or marriage.

Also since a child receives a basic education in investing in equity, it can help them to understand the importance of money. According to reports, only 24% of the population in India has financial literacy in comparison to the rest of the world. So, it can help a child to understand finance and plan accordingly for savings and their future.

Do’s and Dont’s of a Trading Account For Minor

Since a Minor trading account is held by a parent/guardian, you can:

  • Apply for IPO, FFO, OFS in the name of the Minor
  • Invest in shares, securities, and ETF’s through a stockbroker
  • Invest in Mutual Funds for the benefit of the Minor

However, you cannot use a Minor Trading Account to:

  • Intraday Trading because it is highly volatile
  • Trading in Futures and Options
  • Pledging your shares
  • Payment from a bank account other than the Minor’s bank account

Documents Required To Open A Minor Trading Account

Just as you can open a Demat and trading account for different kinds of investors, such as – individual and corporate investors, NRIs, joint investors. It can be done in the name of a minor if you have the below-mentioned documents and follow the procedures.

  • Account Opening Form

You will be provided with a Minor account form where you have to fill up the details of the Minor and the Guardian. There will be two separate KYC forms that have to be filled by the guardian. The account opening form and KYC forms must have the signatures of the Guardian.

  • Identity Proof

Identity proof can include any of the following:

  • PAN card
  • Voter card
  • Passport
  • Driving Licence.

Both the Guardian and the Minor have to mandatorily submit any of the above-mentioned identity proof.

  • Address Proof

Address proof can include any of the following:

  • Aadhar Card
  • Ration Card
  • Utility bills
  • Lease or Sales agreement of the property.

You would also require to provide:

  • The birth certificate of a Minor
  • Bank account details where you and the Minor is a joint holder.
  • A Respective court order copy (If you are a legal guardian of the Minor)

Once all the documents are submitted and verified by the stockbroker, your Minor Trading account is ready to be used. It is important to remember that the minor Demat and Trading account cannot be opened as a joint account and remains in the name of the Minor.

Conclusion

If you want to secure your child’s future, then opening a minor trading account is a good idea. It will help you save the money separately which otherwise can get skipped due to household expenses. Also, with a minor account, your child can learn the basics of investing, thus growing up as a responsible and efficient adult to manage his/her wealth.

If you want to open a trading account for a minor, contact Choice Broking today.