Try to start investing in a scheme for your child as soon as he is born, which will accumulate enough funds for him so that when he grows up, you do not have to worry about his higher studies and other necessary expenses. Mutual Fund SIP can prove to be a better option in this case.
Mutual Fund SIP: Everyone wants to give a good future to their child, so the responsibility also increases with the birth of the child. As the children grow up, their needs and expenses also increase. If you do not plan for this in time, then you may have problems in raising money later. Therefore, try to start investing in a scheme for the child as soon as he is born, so that enough funds are accumulated for him so that when he grows up, you do not have to worry about his higher studies and other necessary expenses.
Mutual Fund SIP can prove to be a better option in this case. This is a means of investment that can beat inflation and create a good fund for the future. If you start a SIP of just Rs 5000 with the birth of a child and keep applying a top-up of 5% every year, then you will accumulate an amount of more than Rs 50,00,000 in 18 years. Know here how-
How to apply a top-up of 5 percent
If you start a SIP of ₹5000 and apply a top-up of 5 percent every year, then you get a huge benefit from it. Actually, Top-Up SIP is a facility through which you can add some amount to your regular SIP. Suppose you start a SIP of ₹5,000 and apply a top-up of 5 percent every year, then in the initial year, you will have to deposit only ₹5,000 for 12 months.
In the next year, you have to increase this amount by 5% of 5,000 which will be Rs 250. That means, next year you will have to deposit Rs 5,250 in SIP. In the next year, you have to increase 5% of 5,250 rupees i.e. 262.5 or 263 rupees, that means you will have to run a SIP of Rs 5,513. Similarly, you have to apply a top-up of 5% on the total amount every year.
How will you deposit more than 50,00,000?
If you run a SIP of Rs 5,000 with an annual top-up of 5% for 18 years, then you will invest a total of Rs 16,87,943. The average return on SIP in the long term is considered to be 12%. At the rate of 12%, you will get Rs 34,57,451 only as interest. In this way, after 18 years your child will be the owner of Rs 51,45,394. If the return is more than 12 percent, then the amount will be even higher after 18 years.
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