Finance

How to invest for the future of your children using a SIP

Saving and planning the investment for your child’s future is one of the most important components in anyone’s life. With the increase in education costs, living costs, and inflation; it has become indispensable to start saving for your child from the beginning itself. If we would take the current price of education, then it is not just about accumulating funds for paying the college tuitions fees. There are several additional costs involved like accommodation, food, coaching fees, and some recreational fees as well. Education has nowadays become an expensive affair and needs to be tackled smartly.

Planning and investing for your child’s future will tend to vary as it would greatly depend on the age of your child. If the child is 3-5 years old, then the parents have enough time to accumulate the required sum of money. However, if the child has reached the age range of 12-14 years, then the parents are not given the luxury time. Therefore, the financial experts suggest that parents should plan out and start investing for their child’s future from the beginning itself.

SIP for Your Child’s Secure Future

Though there are several options for saving and investing for your child and his/her future, mutual fund SIP (Systematic Investment Planning) is considered to be the most reliable and secure option. An SIP allows the investors to deposit a certain amount of money every month in some lucrative mutual fund scheme. The deposited amount of money every month goes straight towards the buying units of the particular fund. The calculations involved can also be carried out at ease with SIP calculators.

Mutual funds are considered to be the ideal options as these funds make the investment across the entire spectrum and offer a wide range of benefits like professional management, liquidity, diversification, and tax benefits. The investors can select the different mutual fund categories that suit their respective risk profiles, investment horizon, and return expectations. Amongst all the mutual fund categories, the SIPs are the most suitable for parents who have long-term investment horizon in their minds with respect to their child’s future. This is because these mutual fund categories generate higher returns on the long-term basis even after certain risks of the short-term volatility.

In the investment of SIP for your child’s secure future, there is a simple underlying principle that works: “if the Net Asset Value (NAV) that is the price of a unit of fund tends to be high, then the investors get fewer units. If it is low, then they get higher units.”

Some of the basic advantages of investing in the SIP schemes for ensuring your child’s future include:

  • Great Return Generation: Over a span of time, the returns from the SIPs tend to be great. If you happen to be a regular investor in some reliable SIP scheme and if you are investing the same amount of money every month into the scheme, then you can expect some good returns over a long period of time. This calls for starting the investment from quite an early time when your child is still young.
  • Long-term Benefits: The SIPs offered by various mutual fund schemes help to stay over a long-term basis. This implies the fact that you do not earn from the high return potential of the equity markets, but you are able to ward off the potential risks that are associated with the asset class. SIPs help the investors in reaping benefits from the “Rupee Cost Averaging. This means that the investors can fix their profits from the SIPs as per their pocket requirements. Thus, it is highly beneficial for investors planning long-term growth and security for their child.

 

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Karen Jean

Karen Jean