New parent here’s why you need to start an SIP for your kid

start an SIP for your kid

New parent here’s why you need to start an SIP for your kid

Being a new parent can be a stressful time with all the changes that take place in your lifestyle. One of the most important things one can do for their child is to start an SIP at a very early age, preferably when they are born. Being a parent brings a lot of financial liabilities such as paying for college, funding trips, providing business capital when the kid grows up, wedding and the list is never ending. But there is one simple solution to all these contingent liabilities and that is starting an SIP.

Let’s get some numbers involved in order to give you a better understanding of what we are trying to convey. Let’s say you start investing ₹ 10,000 every month in mutual funds through an SIP till your child graduates college at the age of 21 and requires funds to start a business. If your investments grow at the rate of 12% per year, which is easily achievable, your investments of ₹ 10,000 a month would give your child ₹ 1, 13, 86,000 when he/ she graduates from college. Now that is a very significant sum to start any new venture.

Another very effective way to invest in and secure your child’s future is investing into SIPs according to particular goals. For example, you can have 4 SIPs of ₹ 2500 for your child for 4 different goals like their wedding, education, funding their business etc. In India there is a culture of giving envelopes to kids on special occasions like festivals and birthdays, individuals with a bright financial acumen invest these extra funds into the ongoing investments of their kids rather than buying them toys or keeping them in their piggy banks where they will continually lose their value.

Being a parent can be financially stressful but such financial planning and implementation is what can keep you ahead of the game in the long term. You won’t even realise when these monthly SIP instalments grow into significant amounts of wealth that fund you child’s ambitions without hurting your retirement funds and bank balance.

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