SIP-plans-for-child-education

The ultimate guide to top 10 best SIP plans for child education in India

Education has become very expensive in India. Statistics show that educational inflation is around 11% in the country today, and the cost of education is expected to soar in the future.

A report by the National Sample Survey Office (NSSO) during the period of 2008-14 stated that the annual cost of education burgeoned by 2.75 times when compared to 2008, whereas the per-capita income had only increased by 2.49 times, indicating the mismatch in the income growth and the increase in the cost of education.

High tuition fees coupled with the difficulty of paying bills and staying independent cause highly qualified and bright minds to even refrain from applying to colleges. The tuition rates are increasing all over the world and are rising faster than the growth in per capita income.

Looking at these expenses from an exchange rate perspective, rupee owners will always have a disadvantage in terms of the cost of overseas education due to our country’s current account balance, relative interest rates, and inflation which cause a weakening of the Rupee.

In the near future, the trend would continue hence ballooning the fees even further. Investing is a mantra that can be followed to rise above the tide of this soaring educational inflation.

A wealthy corpus is accumulated and the effects are more prominent when the investor starts saving at an earlier stage owing to the compounding effect.

The reason why invest in a SIP plan for child education?

1. Reduce the financial burden

This forms a habit of investment discipline by debiting a fixed amount from your bank account at every periodic interval. This also prevents a lump sum or a sudden outflow of money from your pocket, hence maintaining financial stability.

2. Start investing in small amounts

Most SIPs start at a minimal amount of Rs 500, which enables the investors to save for their child’s future – one penny at a time.

3. Rupee cost averaging

By investing through SIP, one can also benefit from rupee cost averaging – where the cost of purchasing a unit of the fund is averaged over the time horizon thus protecting its investors from volatile market conditions and price fluctuations.

4. Compounding effect

Investors also benefit from the compounding of returns, where the returns earned on the invested capital are re-invested into the fund.

Additional read: SIP savings for higher education

Top 10 SIP plans for child education

Scheme Name1-Yr ReturnAUMProsCons
Aditya Birla Sun Life Frontline Equity Fund

Expense Ratio: 1.08%

Min SIP Amount: Rs 100
14.85% Rs 18,897.76 CrLower expense ratioAssets Under Management (AUM) of the fund are greater than Rs 15,000 Cr.

When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.

The investors should monitor the performance
Axis Long Term Equity Fund

Expense Ratio:
0.72%

Min SIP Amount: Rs 500
14.85% Rs 28,556.83 CrFund has higher 3-year and 5-year returns as compared to the category average.

ELSS fund – Tax haven for 80C
Assets Under Management (AUM) of the fund are greater than Rs 20,000 Cr.

When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.

Investors should monitor their performance.
Parag Parikh Flexi Cap Fund

Expense Ratio: 0.96%

Min SIP Amount: Rs 1000
21.11%Rs 8,701.65 CrFund has higher 1-year, 3 years, and 5-year returns as compared to the category average.

Low expense ratio.
None
SBI Equity Hybrid Fund

Expense Ratio: 0.97%

Min SIP Amount: Rs 500
12.20%Rs 38,080.12 CrFund has higher 1year, 3-year, and 5-year returns as compared to the category average.

Low expense ratio.
Assets Under Management (AUM) of the fund is greater than Rs 20,000 Cr.

When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.

Investors should monitor their performance.
SBI Focused Equity Fund

Expense Ratio: 0.97%

Min SIP Amount: Rs 500
13.08%Rs 14,533.37 CrFund has higher 3-year 5 year and 10-year returns as compared to the category average.

The fund has been in the market for over 10 years.
High expense ratio
Axis Bluechip Fund

Expense Ratio: 0.55%

Min SIP Amount: Rs 500
Rs 25,134.85 CrFund has higher 1-year 3-year and 5-year returns as compared to the category average.

The expense ratio is on the lower end and the fund has no lock-in period.
Assets Under Management (AUM) of the fund are greater than Rs 20,000 Cr.

When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.

Investors should monitor their performance.
L&T Midcap Fund

Expense Ratio: 0.77%

Min SIP Amount:
Rs 500
67.18% ( 3 year = 7.25%)Rs 6,258.04 CrFund has higher 5-year returns as compared to the category average.

The expense ratio is on the lower end.
Assets Under Management (AUM) of the fund are greater than Rs 5,000 Cr.

When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.

Investors should monitor the performance.
HDFC Mid-Cap Opportunities Fund

Expense Ratio: 1.04%

Min SIP Amount: Rs 500
75.85% ( 3 year = 7.94%)Rs 25,779 CrFund has higher 5-year returns as compared to the category average.

The expense ratio is on the lower end
Assets Under Management (AUM) of the fund are greater than Rs 5,000 Cr.

When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.

Investors should monitor their performance.
Axis Small Cap Fund

Expense Ratio: 0.38%

Min SIP Amount: Rs 500
74.30% (3 year = 17.37%)Rs 4,724.14 CrFund has higher 3-year and 5-year returns as compared to the category average.

The expense ratio is on the lower end
None
HDFC Small Cap Fund

Expense Ratio: 0.95%

Min SIP Amount: Rs 500
94.91% (3 year = 5.88%)Rs 10,024.44 CrFund has higher 3-year and 5-year returns as compared to the category average.

The expense ratio is on the lower end.
Assets Under Management (AUM) of the fund are greater than Rs 5,000 Cr.

When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.

Investors should monitor their performance.
SIP plans for child education

Additional read: How SIP calculator can help you?

Which funds should you choose?

Selecting the funds which are tailored to your investment requirement time horizon, income, target corpus, and risk appetite is the first critical step that you should take as a parent investing in your child’s education.

One could start by investing in one fund and then diversifying to 2 or 3 funds by proportionately investing across the schemes.

You should ideally aim for a smaller proportion of investments in small and mid-cap funds which bring in high returns (along with high volatility) and balance them with large-cap funds which have stable returns (lower than small and mid-cap).

SIP plans for child education in India

Final summary

A financial strategy for your child’s education is an absolute necessity, given the high educational inflation that is prevailing in the world today.

The strategy should factor in your income, target corpus, investment horizon, and risk appetite.

Starting early in terms of investments lowers the financial burden in the future and helps you in paving the path for your child’s dream career.

There is no appropriate or right time to start investing in your child’s education because the right time is now.

Note – The past track record of a fund is no guarantee of its future performance.

FAQ

Is SIP good for child education? 

A SIP is a great way to save for your child’s education.

You have the flexibility to select the amount and invest regularly in your chosen funds. You can also redraw the money when you need it or pause the SIP if you wish to do so.

SIP is a systematic and disciplined way to save for your child’s future education. 

Which mutual fund is best for child education? 

Here are the top mutual funds that offer SIP for your child’s education: 

  • Aditya Birla Sun Life Frontline Equity Fund 
  • Axis Long Term Equity Fund 
  • Parag Parikh Flexi Cap Fund 
  • SBI Equity Hybrid Fund 
  • SBI Focused Equity Fund 
Can I open a SIP for my child? 

Yes, you can start a SIP for your child. Download the EduFund App and select the funds you like and start investing.

How can invest in SIP for kids? 

To invest in SIP for your kids you can download the EduFund App and start saving for their future.

Select the funds that suit your risk appetite and your goals, select the amount you are comfortable sending, and start saving!

Which SIP is best for kids? 

Here are some mutual funds that offer SIP investments starting at Rs. 100 or Rs. 500:  

  • Aditya Birla Sun Life Frontline Equity Fund  
  • Axis Long Term Equity Fund  
  • Parag Parikh Flexi Cap Fund  
  • SBI Equity Hybrid Fund  
  • SBI Focused Equity Fund 
Consult an expert advisor to get the right plan for you

Disclaimer

Mutual fund investments are subject to market risks and EducationFund does not endorse any fund over another in this blog.

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