Build ₹50 Lakh Wealth for Your Child’s Education by Saving Just ₹100 Daily
Planning for your child’s future, especially their higher education, can feel overwhelming given the skyrocketing costs of education. However, with consistent small investments, you can secure a substantial amount over time. By saving as little as ₹100 daily, you can build a ₹50 lakh corpus in 18 years through systematic investment planning (SIP) in equity mutual funds.
How to Build ₹50 Lakh for Your Child’s Education
Start Small
Begin by saving ₹100 per day, which translates to ₹3,000 per month. This amount can be invested monthly in a diversified equity mutual fund, such as a flexi-cap fund, through a SIP.
The Magic of SIPs
SIPs leverage the power of compounding and rupee cost averaging, enabling your investment to grow steadily over time. For instance:
- Investing ₹3,000 per month in a flexi-cap fund delivering 14.5% average annualized returns over 18 years can grow to approximately ₹28 lakh.
While ₹28 lakh is significant, education inflation means you may need a larger corpus to cover future costs.
The Game-Changer: Step-Up SIPs
To bridge the gap and achieve the ₹50 lakh goal, consider a step-up SIP.
What Is a Step-Up SIP?
A step-up SIP allows you to increase your monthly investment amount by a fixed percentage annually.
For example:
- Start with ₹3,000 in the first year.
- Increase it by 10% annually, so it becomes ₹3,300 in the second year, ₹3,630 in the third, and so on.
Results with Step-Up SIP:
- Assuming the same 14.5% annualized returns, your total investment over 18 years (₹16.4 lakh) would grow to ₹50 lakh, significantly higher than a fixed SIP.
Why Choose Equity Funds?
Equity mutual funds are ideal for long-term goals like education due to their:
- Inflation-Beating Returns: Higher returns compared to traditional investments.
- Diversification: Flexi-cap funds invest across market caps, ensuring both growth and resilience.
- Flexibility: No rigid lock-in rules compared to other schemes.
Comparative Analysis of Investment Options
| Investment Option | Returns (Annualized) | Corpus After 18 Years | Key Features |
|---|---|---|---|
| Flexi-Cap Mutual Funds | 14.5% | ₹50.6 lakh | Ideal for long-term goals with diversification and high growth potential. |
| Public Provident Fund (PPF) | 7.9% | ₹29.2 lakh | Safe and tax-free but lacks the potential to beat inflation. |
| Sukanya Samriddhi Yojana | 8.4% | ₹33.7 lakh | Good for a girl child with guaranteed returns and tax benefits. |
| Fixed Deposit (FD) | 6.9% | ₹29.2 lakh | Low returns and tax inefficiency; suitable for short-term safety. |
| NPS Vatsalya | 13.1% | ₹45.1 lakh | Decent returns but lacks flexibility due to withdrawal restrictions. |
Your Action Plan to Achieve ₹50 Lakh
1. Start Today
Begin with a SIP of ₹3,000 per month.
2. Step Up Your Investments
Increase your SIP by 10% annually to keep pace with inflation and rising income.
3. Stay Disciplined
Invest regularly, irrespective of market fluctuations, to let compounding work its magic.
4. Embrace Equity
Don’t fear short-term volatility. Equity investments stabilize over the long term, making them the best choice for wealth creation.
Why Early Planning Is Essential
Starting early gives you the advantage of time, allowing even small, regular investments to grow significantly. By beginning today and staying consistent, you can ensure a financially secure future for your child, without the stress of making larger investments later.
Conclusion
Education costs may seem daunting, but with disciplined savings and smart investments like SIPs in equity mutual funds, achieving a ₹50 lakh corpus is entirely feasible. Start small, plan for incremental growth through step-up SIPs, and watch your investments grow to meet your child’s aspirations.
