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How SIP Can Help You Build a Corpus For Your Child’s Education and Marriage

As a parent, you want to provide the best of everything to your children. However, the best comes at a cost. Education is expensive and if you dream of sending your child to a premier college or university, you must plan well in advance.

Nov 2022

4 mins read

In India itself, education inflation is about 11-12%, according to the National Sample Survey Office.¹ Moreover, with the rupee depreciating over the years, an overseas education may become costlier in the future. Marriage is another important dream that many Indian parents have for their children, with the average wedding costing anywhere between Rs 20 lakh to Rs 50 crore.

By planning your finances carefully, you can fulfil the dream of sending your child to the best college or giving them a dream wedding. If you think that they are too young now and you still have time to plan, remember that the earlier you start, the more you can save. If you have not started yet, it may be prudent to invest in a disciplined manner through SIP.

What is SIP?

SIP or Systematic Investment Plan, is one of the most effective ways of investing in any asset class. It allows you to invest in instalments, such that a chosen amount is debited from your bank account periodically and invested in a chosen mutual fund scheme. With SIP, there is no hassle of remembering to invest on any particular date, as an investment is made irrespective of market conditions. SIP investments can start from as little as Rs 500 a month. You can then step up your investment and continue it for as long as you want.

How SIP helps you build the corpus you need

There are many advantages of investing in mutual funds through SIP to build a healthy corpus for the future. These advantages include:

1. Rupee Cost Averaging:

Rupee cost averaging helps you beat market fluctuations. The investment amount through a SIP is fixed and is invested on a given date, irrespective of the market conditions; thus, in a bearish market, when the market falls and the prices decrease, you might end up getting more mutual fund ‘units’ and in a bullish market, when the prices rise, you might end up getting fewer units. Thanks to rupee cost averaging, over time your average investment cost would be lower than if you were to enter the market with a lump sum. This lowers the risk of market volatility for your investment.

2. Compounding benefits:

As you remain invested longer in the market, you get returns on your entire investment and not just the incremental investment amount. You can thus enjoy compounding benefits for your investment. In other words, the longer you remain invested in the market, the higher your overall yield. This will help you achieve major financial goals much quicker than you might think.

3. Convenience:

Since a SIP can be done with minimal investment, it does not pinch your wallet. SIPs can also be stopped at any time without any hassle or charges. Thus, it is a very convenient way to start your investing journey early, instead of waiting to accumulate a larger amount of money. Starting early gives you a huge advantage in building a large corpus.

4. Inculcating positive habits:

SIP helps you build a positive habit of investment and saving. Most people tend to get into the habit of investing through SIPs and usually do not stop as long as the mandate for auto-debit is in place. SIP thus helps you build the discipline you need to achieve big goals like your children’s education or marriage.

How can SIP help with your child’s education and marriage?

The key word here is time. The earlier you start saving, the easier it is to invest small, affordable amounts, benefit from compounding and accumulate a considerable corpus for your child’s future. Here are some calculations to show you how SIP can help you accumulate a large sum in time:

Expected End Value of your Investment With Monthly SIP of Rs. 10,000
Exp. Returns	Number of Years of Investments
Exp. Returns	1	3	10	15	20	25	30
8%	1,25,329	4,08,058	18,41,657	34,83,451	59,29,472	95,73,666	1,50,02,952
12%	1,28,093	4,35,076	23,23,391	50,45,760	99,91,479	1,89,76,351	3,52,99,138
15%	1,30,211	4,56,794	27,86,573	67,68,631	1,51,59,550	3,28,40,737	7,00,98,206
20%	1,33,829	4,96,010	38,23,636	1,13,42,949	3,16,14,794	8,62,67,082	23,36,08,018

(Note: The illustrations above are merely indicative in nature and should not be construed as investment advice. They do not in any manner imply or suggest current or future performance of any Mutual Fund Scheme. Rupee Cost Averaging and SIP neither ensure you profits nor protect you from making a loss in declining markets.)

SIPs have become a popular mode of investment due to their strong returns and convenience. With the right SIP investment, you too can accumulate a healthy corpus for your future endeavours. Simply pick a sound SIP based on your financial goals and risk appetite and give your investments time. Keep reviewing and dialling up the investment periodically and you’ll soon amass a corpus to achieve everything you want for your child.

Source:
1. https://www.financialexpress.com/money/why-you-should-be-financially-ready-before-preparing-your-child-for-education-abroad/2205415/
2. https://www.reliancemoney.co.in/getting-married-in-india-what-does-an-average-wedding-cost#:~:text=An%20average%20Indian%20wedding%20could,his%20lifetime%20on%20his%20wedding
3. https://www.tflguide.com/cost-of-higher-education-in-india-calculator-infographics/
4.https://timesofindia.indiatimes.com/india/mutually-yours-indians-growing-love-affair-with-sips/articleshow/86112511.cms

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