SBI Mutual Fund Nivesh Cafe: How can SIP secure your children's future? Here's how to invest..
Today, every parent's biggest concern is their children's future. Good education, a better career, and ever-increasing inflation – amidst all this, the question remains: how to do proper financial planning? This very topic was discussed in detail at the SBI Mutual Fund Investment Cafe, focusing on investment strategies for children (juniors), where parents openly shared their questions and concerns.
Everyone has their own advice, making decision-making difficult.
The program clearly showed that there is no shortage of opinions regarding children's future. Some parents consider investing in gold to be safe, while others believe buying land is a better option. Many suggested SIPs and mutual funds as suitable long-term options, while some prioritized term plans and health insurance. During the discussion, it also emerged that in India, every third person offers advice, making it even more challenging to choose the right path.
The foundation of planning: Framework and backward thinking
Experts at the Investment Cafe emphasized that investing for children should not be done without a solid plan. First and foremost, it is essential to create a clear framework. For this, backward calculation was advised. That is, estimating how much the fees for courses like engineering, medical, MBA, or law are today and how much this expense might reach after 15-18 years. This estimate should determine the roadmap for today's investments.
Understand not just returns, but also volatility.
The discussion also highlighted that deciding on investments based solely on past returns is not correct. Understanding market fluctuations (volatility) is equally important. In this context, options like equity mutual funds, hybrid funds, and solution-oriented children's plans were discussed. Children's plans are a separate category of mutual funds specifically designed for goals like children's education and have a 5-year lock-in period.
The power of SIP, compounding, and step-up
The real power of SIPs comes from time and compounding. The earlier the investment is started, the greater the benefit. Experts advise starting with a small amount and increasing the investment every year to mitigate the effects of inflation. As the child grows older, the investment amount should also increase. For example, you can start a Systematic Investment Plan (SIP) with ₹2,000. When the child turns six, this can be increased to ₹4,000. The SIP amount should then be increased on every subsequent birthday. This process is called a top-up or step-up, which provides a strong foundation for the child's future in the long run.
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