Education is costly. It’s a big investment, but it’s one you shouldn’t hesitate to make because it protects your child’s future. But have you realized that school spending outnumbers all other expenses incurred by a parent? You may have to spend anywhere between Rs 15 lakh and Rs 1 crore on education alone, including everything from annual tuition fees, books, stationery items to extracurricular activities. The only way to make this possible is through saving and investing. Hence, comes the monthly SIPs.
According to tax and investment experts, making investments as early as possible is usually suggested, but if someone is late in financial planning for their child’s higher education, mutual fund SIP can be a suitable investment strategy. A mutual fund’s Systematic Investment Plan, or SIP, is a solid investment strategy because it allows you to make small, regular investments while taking advantage of compound interest.
Experts claimed that it would take at least 8-10 years to earn enough wealth for a child’s higher education. So, even if your child is ten years old, you have ample time to save enough money for his or her higher education. Emphasizing this, Vinit Khandare, Founder & CEO at MyFundBazaar India Private Limited said, “If an investor wants to invest for higher studies of 10 years, then there is around 8 years time left for him to meet his or her investment goal as higher studies generally begin when a child becomes 18 years old.
For such investors, mutual funds SIP can be a good option as it will allow the investor to create big amounts with small monthly SIPs.” He said that education inflation is around 10% and that equity mutual funds are better suited as they provide at least a 12% return over the medium to long term.
Vinit Khandare when asked what investment goal one should consider when investing for one’s 10-year-old child’s higher education, he answered, “Currently, cost of higher education is around 10 lakh. If we assume 10 percent inflation for the next 8 years, then the future cost of higher education comes at around ₹22 lakh. So, one should look at accumulating ₹22 lakh in next 8 years while investing for higher studies of one’s 10 years old child.”
SIP Calculator helps you to calculate the returns you will get on your Systematic Investment Plan. It is advised to use this calculator to get accurate results, which is important in taking calculated risks. To achieve the investment goal of 22 lakh, assuming a 12% return on monthly SIPs, the calculator suggests that one has to invest ₹ 14,000 in monthly SIPs for 8 years.
SIP step up calculator is also suggested by experts as it gives you the future value of your SIP investments which increases periodically by a given percentage. Kartik Jhaveri, Director — Investments at Transcend Capital said, “Starting a mutual fund monthly SIP of ₹14,000 might not be easy for an investor. But, one can use an annual step-up of 10 percent in one’s monthly SIP amount. It will enable the investor to bring down one’s monthly SIP at best possible lowest levels.”
The Step-up SIP calculator estimates that an investor would need a monthly SIP of ₹10,500 to accomplish ₹ 22 lakh investment goals, assuming a 12% return on monthly SIPs for 8 years with a 10% annual step-up.
Best five Mutual funds in 2021 for child education with SIP investment
Some of the best mutual funds you should invest for your child education with SIP are listed below:
- SBI Magnum Children’s Benefit Fund
- UTI CCF- Investment Plan
- HDFC Children’s Gift Fund
- Axis Children’s Gift Fund
- LIC MF Children’s Fund
Choose the best Monthly SIPs and start early investment for your child’s better future and higher education.
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