How parents can save through SIP investment?
Rising inflation is eating your money. If you don’t park your savings in a suitable asset class that can beat inflation, then with time, the value of your savings decreases. Basically, with time, the value of the currency decreases.
For example, in 2002, you could buy 20 apples for Rs 100, but in 2022, you can only buy two apples for the same Rs 100. So, you must put your savings in a suitable asset class to beat inflation.
Saving as a parent is essential for your child’s future needs. Not only to fulfill the child’s needs but also to maintain and upgrade the quality of living.
Almost every parent wants to save for their children, but some fail to do that. The reasons could be that they cannot save enough, don’t know where to put all their savings, etc.
In this topic, we’ll explain how parents can save through SIP investment.
How do SIP works?
SIP stands for Systematic Investment Plan, a financial tool to invest a fixed amount regularly in a mutual fund scheme. Investing regularly gives you the benefit of rupee cost averaging.
This means that you buy at a low and high price and the overall cost of buying averages out. With the SIP, you don’t need to time the market.
How can SIP investment help parents to save?
Parents can do the proper planning for their child’s higher education and marriage.
A financial plan will help them know how much to save for a specific goal and the amount required to save on a monthly basis to achieve the desired target.
Putting a lumpsum amount for any specific goal may be a difficult task. But saving monthly could make it easy.
SIP investment gives you the option to save as low as Rs 100. So, you can save and invest with Rs 100 only. With an example, let’s see how much you need to save as lumpsum and as SIP for your child’s higher education.
Let’s assume your child’s age is one year old, and you want to send your kid for an MBA from IIM Ahemdabad. So, technically you have almost 20 years to save.
The present cost of attending a master’s degree from IIM Ahemdabad is Rs 30 Lac. And after 20 years, it might cost you Rs 1 Crore, assuming an inflation of 7% annually.
Let’s see how much you need to save as lumpsum and as SIP for your child’s higher education.
If you look at the table below, you can see that you only need to save Rs 10,000/month for your target, whereas if you want to invest a lumpsum amount, you need Rs 9 Lac for the same target.
That’s how SIP investment helps your little money to grow over the period and helps you to achieve the desired target. Investing through SIP can make your investment journey more affordable and efficient.
|Monthly SIP Amount||Total Amount Invested||Accumulated Amount|
Source: EduFund Research Team
|Lumpsum Amount Required||Total Amount Invested||Accumulated Amount|
Source: EduFund Research Team
Investing through SIP can help parents by savings little money to make a large corpus. SIP has been the most effective way of saving and investing.