Having a child entails a lot of responsibilities which may need a lot of financial support. There are two major expenses which every parent must foresee: Higher Education & Wedding.
Instead of saving money in an account, creating FDs or buying insurance policies, we advise you to invest a small amount every month. This would accumulate a large corpus in the next 15 to 20 years.
Let’s say you earn around Rs 50,000 per month when your child is born. If you invest just 5% of your income (Rs 2500) every month in SIPs, increasing it by 5% every year, with an annual return of 16%, your invested money would grow to about:
So instead of making insurance policies in your children’s name, invest using SIPs. This is because insurance plans usually give returns in the range of ~6% per annum which may grow to a significant amount in absolute terms but does not do so in real terms.
Insurance companies also invest in the equity markets – the difference is that they keep a large chunk of the profits with themselves, all in the name of safety and security.
Save smarter. Start an SIP.