In India, education is very important, but these days, enrolling children in a good school or college is an expensive affair. Parents want to ensure their children can attend good schools or colleges. One way to save on this is through systematic investment plans. SIPs are a way to invest small amounts of money in mutual funds regularly. This article explains when parents should start SIPs for their child’s education. So, let’s get started:
What are SIPs?
A SIP, or Systematic Investment Plan, is a disciplined way to invest in mutual funds. Similar to a recurring deposit, it involves setting aside a fixed amount—usually every month—for investing in the market. You can start a SIP with as little as ₹500.
To help plan your investments and understand potential returns, you can use an SIP calculator. This tool enables you to invest in equities and mutual funds while better controlling risk.
Why Starting SIPs Early is Important?
Let’s explore why investing in SIPs is very important these days:
1. More Time for Money to Grow
Savings from SIPs accrue more value when parents initiate them early because time gives money a greater opportunity to prosper. The money you earn under compound interest naturally turns into new earnings from your investment. An SIP established by parents for their 2-year-old child will help the money grow over the next 15 years before their child begins college. As little as ₹2000 per month invested creates substantial financial growth over time. Starting SIPs early in life produces reduced pressure to accumulate large amounts of savings in the future.
2. Smaller Monthly Investments
SIPs become more manageable for parents who begin investing early because they can afford lower monthly contributions. Investing ₹3000 per month for 15 years will transform into significant amounts of money suitable for college expenses. Starting SIP investments at age 12 requires families to save ₹10,000 each month to reach the financial target. Parents’ financial goals are simpler to maintain through smaller monthly spending amounts.
3. Handling Rising Education Costs
In India, the cost of education is increasing every year. Schools and colleges charge more fees, and living expenses for students are also high. Starting an SIP early helps parents build enough funds to cover these costs. To begin investing, parents can open demat account, which is essential for holding and trading mutual fund units. Apart from that, the money grows over time, so parents can afford better education options for their child, like studying abroad.
When Should Parents Start SIPs?
Below are some of the opportunities when parents can start investing in SIPs for their children:
1. As Soon as the Child Is Born
The best time to start an SIP is when the child is born or very young. This gives parents 15-18 years to save for college. Even if they can only afford ₹500 a month, it can grow into a helpful amount. Also, starting early means parents can choose funds that invest in stocks, which grow more over a long time but are riskier.
2. Before the Child Starts School
If parents miss starting at birth, they should begin before the child goes to school, around age 4 or 5. This still gives 12-13 years for the money to grow. Parents can pick a mix of stock and bond funds at this stage to balance growth and safety. Starting at this age also helps cover school fees and college costs.
3. At Least 10 Years Before College
If parents can’t start early, they should begin an SIP at least 10 years before their child needs the money for college, around age 7 or 8. This gives enough time for the investment to grow, but parents may need to invest more each month. Therefore, planning is key to avoiding last-minute worries.
Things Parents Should Do
Parents must consider several aspects before launching an SIP scheme.
- They should select mutual funds that align with their objectives since equity funds work for long-term expansion and debt funds provide safety.
- Checking monthly budget limits forms the second step when starting an SIP.
- Parents must consult a trustworthy financial advisor to select a suitable investment plan.
Conclusion
Starting SIPs for a child’s future education is a smart way to save money in India. The earlier parents begin, the more their money can grow, and the less they need to invest each month. Starting when the child is born, before school, or at least 10 years before college is ideal. Moreover, SIPs help parents handle rising education costs and give their child a bright future. By planning early and
