Sure every parent dreams and longs to provide their children with the best possible education; however, the harsh reality is that quality education is an expensive affair. So, what do you do? Compromise on your child’s academics and career due to escalating costs? Try investing in an SIP or Systematic Investment Plan instead!
Using SIP for child education planning
With SIPs, you can invest a fixed sum of money at regular intervals, say weekly, monthly, or even quarterly basis, thus helping you generate an education corpus over time. To bring things into perspective – with a modest monthly SIP investment of Rs. 8,700 for a tenure of 10 years at the rate of 12% returns per annum, you can build a corpus as large as Rs. 20 lakhs.
Not sure how to use SIP for education? Here are a few tips to follow.
#1 Open a minor folio account for your child
The first step is to have a minor folio account opened in the name of your child (minor) who will be the sole holder of the account. However, you, as the legal guardian, will need to operate the account on behalf of your child until they turn 18.
#2 Evaluate your time horizon
Your time horizon will have a lot of say in the type of asset class you should be investing in. If your child has a solid 7 to 10 years until their higher studies, use SIP for education by investing in equity funds, known to create substantial wealth in the long run. In case their time for enrolment is drawing near, you need to take a more conservative approach and invest in debt-oriented funds.
#3 Consider your child’s personal goals and aspirations
Not every child wishes to become an accountant or a doctor, and accordingly, the cost of their education will also differ. So, make room for your child’s goals and aspirations and factor in costs accordingly while you use SIP for education. Also, do not forget to consider inflation as years from now; the figures may look completely different from what they do today.
#4 Monitor your portfolio’s performance, often!
The “fit and forget it” mantra does not apply to a mutual fund investment, which needs to be reviewed on a regular basis, preferably, once every year. It is important to compare the performance of your fund with the benchmark as well as similar asset classes. You may need to make changes to your investment portfolio as and when the need arises. Also, do remember that certain schemes are highly profitable for building an education corpus, so choose among the best SIP for child education in India after thorough research.
So you see; providing your child with quality education is not that challenging after all. Just be sure to use an SIP calculator for child education to get an idea of the returns you could expect from your investments. Knowledge is power, and now, it’s available at the tip of your fingers.
Use investment apps like Moneyfy to compare between schemes and choose the one that suits your risk appetite, investment objectives, and other requirements. Start building your education corpus today!
Hey, I am Raj. I am the owner and content publisher at Financenize. I have completed my education till intermediate school and after that turn to a full-time blogger and content writer. I usually share the quality information for the readers in Financenize, which helps the small business, individuals and entrepreneurs and the information I share makes their task more manageable. I am expert in analyzing the current situation and deliver a profitable period to the extent. You can find me on various social media handles online.