Investment: Give your child this gift of financial freedom, understand the secret of the magic of compounding..

Nowadays, parents think of investing early to secure the future of their children. So if you want to build a strong financial foundation for your child, you can start investing from the age of 5 years. The power of compounding is so great that even a small investment of ₹5 lakh can turn into several crores in the long run. This will not only give financial freedom to the child but also big expenses like future education, career and marriage can be easily met.

The financial gift that lasts a lifetime

Normal birthday gifts like toys or gadgets may give children short-term happiness, but financial investment can make life safe and money-making for a long time. A 5-year-old child will not understand its importance today, but when he grows up, this investment will be very useful for his career, education, and future needs.

Initial investments grow bigger over time.

The biggest power of this gift is compounding; the longer the money stays invested, the more it grows, not just at the usual rate but exponentially. For example, if ₹5 lakh is invested at 12% annual return, the amount can grow to around ₹2.6 crore in 35 years. That is, more than 50 times the initial amount, without any active participation from the child.

Corpus growth at 12% annual return

End of Year 1: ₹5.6 lakh

Year 10: Over ₹15.5 lakh

Year 20: Over ₹48 lakh

Year 30: Around ₹1.5 crore

Year 35: Around ₹2.64 crore

What if the returns get better?

If the same annual return is 13%—which can be achieved from equity mutual funds or other market-linked options in the long run—then Rs 5 lakh can turn into about Rs 3.6 crore. That is, the sooner you start, the less the investment and the higher the final amount.

Not just money, but also life options
This kind of corpus is not just an option to make money, but also a way to secure tomorrow. When your child is young, he can use it to buy a house, start a business, or take early retirement. However, choosing the right investment option is also important in this. If you are ready for long-term market risk, then mutual funds or some ULIP options can be right.

Things to keep in mind

-Choose options with long-term compounding
-Choose options with early lock-in only if they match the child's required goals
-Review returns according to inflation
-Consider equity-heavy options for growth, but make decisions according to risk capacity

The power of compounding only works over time.
Compounding works best only when you leave it for decades, not just a few years. In fact, even small investments in the early years lay the foundation for building big wealth in the future. While ₹5 lakh, if ​​invested at the age of 20, will not create as much corpus in 40 years as it can create if invested at the age of 5. (Note: This article is for information only and should not be considered as investment advice in any way; we suggest consulting financial advisors for investment)

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