Start early to beat rising education costs Inflation in education is increasing rapidly. An engineering degree over four years from a premier Indian college now costs ₹25 lakh, and an overseas MBA can exceed ₹60 lakh. Investing in a SIP as early as possible—when the child is little—allows your funds to grow. An equivalent monthly SIP of ₹5,000 for 15 years can result in ₹30-₹35 lakh on the assumption of 10–12% per annum return. The earlier and longer you invest, the more you gain from compounding.
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Invest in funds based on your time horizon If the child is below 8 years, equity mutual funds with a view to index or flexicap funds will be most suitable. For long-term purposes 5-10 years in the future, hybrid funds that have a mix of equity and debt are more stable. As the goal nears, shift to debt funds to protect capital. SIP in schemes designed for children can also bring discipline, but with lock-in periods. Always match your investment horizon with the risk category of the fund.
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Use web-based platforms for SIP configuration SIPs can be initiated easily on websites like Zerodha, Groww, or even directly on mutual fund websites. Utilize a SIP calculator to figure out how much you should invest each month. Maintain the SIP in the parent's name for ease of taxation. You can assign the investment under a "child's education" reason in the folio to remind yourself to stay on track. For further clarity, open a fresh mutual fund folio with a clear reason to fund your child's future education expenses.
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Understand the tax implication of SIPs SIPs under equity mutual funds are not tax-deductible under 80C, but they are tax-beneficial. Long-term capital gains over ₹1 lakh are taxed at 10%. In the event of withdrawal when your child is 18 years or older, they may pay lesser tax depending on their income. Do not invest in the name of a minor to escape clubbing provisions, unless you have a genuine reason and consider the tax implications.
Switch into safer assets before maturity As your child approaches the age of college, taper equity exposure over time. Start this transition 3–5 years ahead of the actual cost. Systematic Transfer Plans (STPs) help transfer funds from equity schemes to debt schemes over time. This lowers market risk at the time of withdrawals. In case of saving for education abroad, take partial SIP exposure to global equity schemes to ward off currency exchange risks and foreign fee inflation.
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2025 is an excellent year to invest Despite some market volatility, SIP inflows in India have been consistently rising, showing investor confidence. With better fund disclosures, lower expense ratios, and SEBI’s tightened oversight, mutual funds are safer and more transparent than before. Even starting with ₹1,000 a month can build meaningful wealth over time. As your income grows, increase the SIP by 10% annually. Discipline, not just returns, is the key to meeting your education goal.
