Small Sip Big Gains Child Wealth: How your Rs 1 lakh/year SIP investment for 5 years can grow to Rs 3.76 crore by your child turns 40
Power of Compounding: Making an early investment for your child can secure their financial future! If you invest just for a few years, the investment can generate a corpus worth several crores. Similarly, a Rs 1 lakh yearly SIP investment for 5 years can generate a Rs 3.76 crore corpus by the time your child turns 40.
Small Investment, Big Gain: When a child is born, parents start thinking about their upbringing and expenses that they require to provide them a quality childhood. In modern times, one needs to have a substantial amount to live a quality life. Amid such a scenario, it becomes important to plan financially. Having an early start can help you gather a sizeable fund by the time your child becomes a teenager. If you invest Rs 1 lakh yearly for just 5 years from your child's birth, the child may get a Rs 3.76 crore amount by the time they turn 40. Know how it may be possible.
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(Disclaimer: This is not financial advice. Do your own due diligence or consult an expert for financial planning.)
Why is financial planning necessary for child?
When you have a child, expenses for your family go up. The child's upbringing and their education are costly. Early expenses of their life can be covered from your regular earnings, but future expenses, such as higher education, can take a lot of money.
Investment for child education
Higher education is necessary in this competitive world, but it is also costly. One can build a corpus for it by making a one-time or periodic investment. Let's see how you may create a corpus for the higher education of your child.
Investment for child education
Suppose your child is a newborn, and you are planning a Rs 2 crore corpus for their education by the time they turn 18 years old. Let's see the monthly SIP and lump sum investments required to achieve that target at a 12 per cent annualised return on your investment.
Rs 2 crore corpus from mutual fund lump sum investment
At a 12 per cent return, a Rs 2 crore amount can be generated from an estimated mutual fund lump sum investment of Rs 26 lakh.
Rs 2 crore corpus from mutual fund SIP investment
Anyone who is seeking to arrange the same amount through the SIP investment needs to start a monthly SIP investment of Rs 28,000, where their estimated overall investment in 18 years will be Rs 60,48,000.
Make small investments to gift crores to your child
Now discuss how your small investments made when your child is born can make a big difference by the time they are in their 30s and 40s. If you start a SIP investment for just 5 years, or if you make a one-time investment at the time of your child's birth, they can get crores by the time they are 40 years old.
Rs 10,000/month SIP investment for 5 years to build Rs 4.28 cr
Now, suppose you start a Rs 10,000 monthly SIP investment when your child is born; they can gather a huge corpus by their 40th birthday if the annualised return on the investment is 12 per cent.
Rs 10,000/month SIP investment for 5 years to build Rs 4.28 cr
In 5 years, the total investment will be Rs 6 lakh, and the estimated corpus will be Rs 8,11,036.
If you stop SIP there, don't withdraw the amount and let it grow for another 35 years, the estimated corpus built will be Rs 4,28,22,392.
From Rs 6 lakh to Rs 5.59 cr corpus
Now if you make a lump sum investment of Rs 2 lakh on your child's birth and let it grow for 40 years at a 12 per cent annualised return rate, the estimated corpus built will be Rs 5,58,30,582.
Rs 1 lakh/year investment for 5 years to Rs 3.76 cr corpus
SIPs are periodic investments where tenures can vary. One may also opt for a yearly SIP investment. If one starts a Rs 1 lakh yearly investment at the birth of their child and makes it just 5 years, their estimated corpus at 12 per cent annualised growth will be Rs 7,11,518.9.
Rs 1 lakh/year investment for 5 years to Rs 3.76 cr corpus
At this stage, if one stops their SIP and lets the corpus grow for another 35 years, the corpus will grow to an estimated amount of Rs 3,75,67,933.
This is the amount that your child may get at 40 years of age with your effort for just 5 years. Having such an amount may help them meet some of their important financial goals or give them financial security for the future.