Is SIP a good way to save for your child’s college?
The rising cost of education is a cause of concern for parents as everyone can’t afford the hefty fee structure.
Parents should look to start saving for their child’s education, especially for college and higher studies from an early age. It helps to lower the monetary burden considerably.
Education fees are like any other necessary expenses that last for a considerable time, hence, parents have to prepare for them with a proper plan.
College education expenses are going to be massive and the sooner a parent starts planning, saving, and investing the chance of a better future becomes more feasible.
One of the best ways to do so is through regular SIPs as it will help reduce any monetary hassles during college.
What is a SIP?
SIP or the Systematic Investment Plan refers to the investment tool associated with various mutual funds. SIP allows investors to invest money periodically for a long period.
Additional read: How SIP Calculator Works?
What should parents do for their child’s college?
- Parents can explore the SIP option as it is a tried and tested method of saving for a child’s college. Financial independence will help your child to get a college education without the hassle of arranging for appropriate funds.
- Research the funds that are performing well for a longer time and shortlist the names that show good potential.
- It is important to start investing in SIP as early as possible as it will give you a longer window to save more.
- When parents start investing early then they have a long time in hand. For example, if Mr. Sharma has been investing in his child’s education for 10 years then his investment amount will be lower with greater returns as compared to Mr. Pascal who may have invested for only six years. A more extended period means less investment and more returns.
- Create a rough layout of the child’s future regarding education, especially college fees as it is very expensive.
- Invest in mutual funds that have a diversified portfolio to reduce the risk of losing money all at once. Take the help of experts in the EduFund App to make wiser and safer investment decisions.
- Consider the additional expenses the child will need besides the tuition fees and save accordingly.
- Tax-saving benefits are attached to several mutual fund schemes that can help parents save a considerable amount through tax exemptions.
Why is SIP beneficial for saving for your child’s college and future?
- SIPs are based on the compounding theory and prove more advantageous at the end of a specific period. The interest rates are calculated and added based on compound interest which brings forth a better investment return than simple interest.
- SIPs help parents become disciplined and regular investors who are fully involved in their child’s future.
- In this era, where everyone is so busy, SIPs are very easy to handle. Investors are allotted units every month based on the NAV at the time of their SIP. The amount is automatically deducted from the account of the investor.
- SIP helps to gain control of the finances as it is possible to start or stop a SIP at a time.
- It helps investors to earn greater returns compared to other investment opportunities like fixed deposits.
- It is possible to start an SIP investment with as low as INR 100 per month, hence anyone willing to invest in their child’s future can do so easily.
- Some SIPs like ELSS funds have tax benefits, hence it is doubly advantageous for the investors to invest in such schemes.
- Numerous asset management houses offer SIP options to meet even the minimum criteria of an investor.
- The most important benefit of a SIP for regular investors is that they can buy mutual fund units at different prices. The average investment premium is much lower compared to other investments.
Best SIP Mutual Funds to Invest in
Is SIP good for college students?
Systematic Investment Plans (SIPs) can be a good investment option for college students who want to start building wealth and saving for future goals. SIPs let you invest small amounts regularly, which can help inculcate a savings habit.
How much should I invest in a SIP for my child’s education?
The amount you should invest in a SIP for your child’s education depends on several factors, including the future cost of education, the time horizon until your child starts college and your financial capacity. It’s wise to consult a financial advisor to determine an appropriate investment amount.
Is SIP safe for students?
SIPs are considered a relatively safe investment option, especially when investing in mutual funds. However, like all investments, they come with some level of risk. It’s essential to choose SIPs that align with your risk tolerance and financial goals. The risk might be reduced by varying your investments.
What is the best investment for child education?
The best investment for child education varies depending on your financial goals and risk tolerance. Common options include SIPs in mutual funds, education savings accounts, fixed deposits, and dedicated education plans. It’s crucial to consider factors like the time horizon, expected returns, and risk before choosing an investment option. Diversifying your investments can also be a prudent strategy. Consulting a financial advisor is recommended for personalised guidance.
Doesn’t SIP sound like a good investment tool to save for your child’s education? It is one of the best and the most preferred options by parents all over the world.
The Edufund App helps Indian parents plan and save for their children’s education easily and effectively. Parents can calculate the future costs of college and save towards their goals in mutual funds with the help of the SIP Calculator available. The SEBI registered investment advisor also has financial experts to guide parents in choosing suitable savings plans.