SIP for Child Education
Definition
Child education SIP planning involves estimating the future cost of your child's education (accounting for education inflation of 10-12% annually), and starting a dedicated SIP to build the required corpus by the time your child needs it.
In Simple Words
Education costs in India are rising at 10-12% per year — almost double the general inflation rate. An engineering degree costing ₹10 Lakhs today will cost ₹67 Lakhs in 20 years. An MBA costing ₹25 Lakhs today will cost ₹1.68 Crore in 20 years. Without a dedicated SIP for education, most parents will face a severe funding gap.
Real-Life Scenario
Priyanka has a 2-year-old daughter. She wants to fund her engineering (age 18) and MBA (age 22). Current cost of engineering: ₹15L → Future (16 years, 10% inflation): ₹69L Current cost of MBA: ₹25L → Future (20 years, 10% inflation): ₹1.68 Crore Total future need: ₹2.37 Crore SIP at 12% return: For engineering (16 years): ₹12,800/month For MBA (20 years): ₹16,800/month Total SIP: ₹29,600/month With step-up SIP starting at ₹15,000/month with 15% annual increase, Priyanka can comfortably fund both goals.
Key Points to Remember
Frequently Asked Questions
Test Your Knowledge
1 questions to check your understanding
What is the approximate education inflation rate in India?
Summary Notes
Start education SIP from the year the child is born
Use 10-12% education inflation for realistic planning
Keep education SIP separate from retirement SIP
Shift to debt funds 2-3 years before the goal date