SIPs to Scholarships Empower your childs dream

May 10, 2025

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Every mom and dad wants their child to get the best schooling possible. It's the key to opening up a stable future. But covering the costs of quality education – whether in India or abroad – is a real worry. Relying on what you saved up or a last-minute loan does not work out and creates unwanted pressure.

Instead, a proactive approach combining disciplined investments like Systematic Investment Plans (SIPs) with strategic scholarship planning helps you steadily build a solid child-education corpus and ensure financial constraints never limit your child’s aspirations.

Read ahead to know more about it.

Why Early Planning for Your Child's Education Fund is Non-Negotiable

Reality check: Inflation in Indian education is typically greater than average inflation and is around 10%. After 15–18 years, a course that costs ₹10 lakhs now might cost ₹40–50 lakhs or more. If you put off preparing until later in life, you will have to save considerably more money later, which will severely impair your financial situation.

Early investment allows you to harness the power of compounding – your investments begin to earn money for themselves. This makes time your best friend when it comes to investing in education for child's India.

What are Systematic Investment Plans (SIPs) for Education

Systematic investing Plans (SIPs) are a type of investing rather than a product. A chosen mutual fund plan allows you to invest a certain amount of money regularly (usually monthly). Unlike savings accounts or fixed deposits, it is a disciplined savings habit that is invested in potentially higher-growth vehicles.

Why are SIPs the optimal way to construct an education fund for a child in India?

1. Disciplined Investing: Automatically saves without timing the market. You do not have to worry about whether the market is down or up; your savings will grow regardless.

2. Rupee-Cost Averaging: You invest an amount of money periodically, so you purchase more units at lower prices and fewer units at higher prices. This levels out your buying cost over a period, without investing a big amount of money at the top of the market.

3. Compounding Power: Small, steady investments accumulate year after year. The returns collected also start giving returns, causing exponential growth on the long-term horizon (10+ years).

4. Accessibility: An SIP for your kid's education can be started for as low as ₹500 or ₹1000 per month, making it easily affordable for most. This makes it easy to get started.

5. Flexibility: You may raise your SIP amount (Step-up SIP) as your income increases, boosting your corpus creation. As a person's income increases, they can save more.

Creating the Education Corpus: Selecting the Right Option

The key to investing in an education Systematic Investment Plan is selecting the appropriate mutual funds. Since children's education is likely to be a long-term plan (10-18 years in the future), equity-oriented mutual funds have the potential to offer inflation-adjusted returns.

1. Early Stage (10+ years to objective): Look at diversified equity schemes, large-cap schemes, or flexi-cap schemes, which are significant equity investors. While they are subject to higher short-term risk, they also provide higher long-term growth opportunities.

2. Near the Objective (3-5 years to objective): Rebalance the investments to low-risk investments such as hybrid schemes (mix of debt and equity) or debt schemes to protect the corpus built up from market volatility.

Calculate the cost of the desired education in the future before initiating your SIP. Think about:

1. Current Cost: Check the course type (engineering, medicine, arts, MBA) and location (India/abroad) fees that your child may opt for.

2. Inflation: Project a sustainable rate of education inflation (say, 8-10% per annum) to determine the future cost based on how far in the future the target is.

3. Time Horizon: Number of years before money is required.

Calculators may assist, but an experienced and certified wealth advisor guarantees a more customised and precise child education corpus in India.

Beyond SIPs: Incorporating Scholarship Planning

SIPs provide the financial building blocks, but don't forget the scholarship opportunity. Scholarship planning in India includes:

1. Encouraging Excellence: Merit scholarships identify scholastic excellence, extracurricular ability, and leadership qualities. Developing these in your child creates avenues for further opportunities.

2. Researching Options: Find out about different scholarships provided by governments, universities, private institutions, and companies on a merit, need, or course-specific basis.

3. Preparation: Standardised tests (e.g., SAT, GRE, GMAT, or country-specific entrance tests) normally take centre stage in admissions and scholarship awards, particularly for foreign education.

Scholarships may help greatly alleviate the cost, and you can use your SIP corpus to meet other incidental expenses or pursue postgraduate studies. However, scholarships should be kept as an aspirational bonus rather than as part of the principal funding plan. Your SIP remains the pillar.

Invest Today for a Brighter Tomorrow

Do not leave your child's future education to fate. Creating a substantial corpus for children's education in India can be done through the disciplined, long-term strategy of Systematic Investment Plans. You can take advantage of compounding through early start, regular investing, selecting proper funds, and discipline. Combine it with intelligent scholarship planning and nurturing your child's talent. Your child deserves it, after all.

-Marifur Rahaman

-Dayco India

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