New Delhi: Every parent wants their child to become self-reliant and independent. Parents work tirelessly to achieve this goal. Many even open investment accounts for their children immediately after birth and start investing regularly, choosing options that ensure both capital safety and future returns.
It is not necessary to invest a huge lump sum right at the start. With the right investment choice, a long-term horizon, and the power of compounding, even small amounts can grow into a substantial fund. Below, you can find details on how and how much to invest each month. We will outline a strategy that allows you to easily earn impressive returns.
For instance, imagine your child has just been born; you have a full 18-year window. By investing in a Systematic Investment Plan (SIP) every month, you can easily achieve average annual returns of 10%, 12%, or 15%.
How much to invest to earn ₹1 crore
Did you know that 18 years consist of 216 months? An estimated monthly SIP is an excellent way to reach the ₹1 crore goal. However, there is an important point to consider: assuming a 15% return is quite aggressive. Returns on stock market-linked investments are not guaranteed; therefore, it is not advisable to base your plan on overly high return expectations.
Find out the returns on a ₹10,000 SIP at a 12% rate
For example, suppose you invest ₹10,000 every month starting from your child’s birth and continue doing so for 18 years. If the average return is 10%, you could easily accumulate approximately ₹57.2 lakh. At a 12% return, this amount would grow to around ₹70.5 lakh.
If the average return reaches 15%, the fund could easily grow to approximately ₹97.1 lakh. In other words, even with a monthly SIP of just ₹10,000, one can come very close to accumulating a corpus of ₹1 crore over 18 years.
Find out how much of a corpus different SIPs can generate
The picture becomes quite clear if we assume an average annual return of 12%. Based on this, a monthly SIP of ₹15,000 yielding a 12% average return could build a corpus of approximately ₹1 crore over 18 years. Now, suppose you didn’t start investing at the time of birth, a nd the child is already 5 years old.
You are left with only 13 years until the child turns 18. In this scenario, assuming a 12% average annual return, you would need to invest approximately ₹28,200 per month to reach the ₹1 crore target. The required monthly investment increases significantly due to the shorter time horizon.
If the child is already 10 years old, only 8 years remain. In that case, an SIP of approximately ₹65,300 per month would be required to achieve the same estimated return. This is precisely why starting early offers the greatest advantage when investing for a child.
