Perhaps the best gift that parents can shower on their children is higher education. It not only helps to make them knowledgeable human beings but also paves the way for a prosperous future, be it in a job or setting up a business. This is especially true in a digital age when the frontiers of knowledge industry are expanding fast. However, a challenge is also emerging in the form of huge expenditure of higher education.
If you have a kid planning a fund for education expenditure is one of your primary responsibilities. There are a host of avenues to build a corpus for higher education that typically begins at 18, when one steps out of school. One can invest in equity directly, but they can suffer from volatility. Fixed Deposits (FD), or other debt instruments will offer predictable returns, but they will be low compared to the needs. Mutual funds stand somewhere in between, generating significant returns with less risk than direct exposure to equities.
See what SIPs can create for you in 15 years
Even if you start investing when your kid is 3, you can create a significant pool of money when he/she turns 18. You will get 15 years to create a corpus. Let’s check the SIP calculator for different monthly investments.
Rs 10k a month in SIP: Say you invest Rs 10,000 a month for 15 years and raise the amount by 10% every year. In this manner you will invest Rs 38.12 lakh from your pocket and the SIP will generate a value of 86.83 lakh, assuming 12% returns.
Rs 12k a month in SIP: If you can raise the SIP in the first year to Rs 12,000, the final value after 15 years will become Rs 1.04 crore.
Rs 15k a month in SIP: If the parents invest Rs every month 15,000 in the first year, a total value of Rs 1.3 crore can be generated shows the SIP calculator.
This SIP will generate more than Rs 2 crore
If you can invest Rs 25,000 a month for 15 years, and follow the same rate of step up, the value of the total investment will sail past Rs 2 crore and reach Rs 2.17 crore. You will be investing Rs 95.31 lakh yourself.
Arranging funds for higher education is one of the most forward-looking tasks that a parent can undertake for his/her child. Using Systematic Investment Plans (SIP) in mutual funds can be a very effective route. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
