If you want to ensure a bright financial future for your child, investing early can be the key. By using the power of compounding, you can grow a small monthly investment into a large corpus over time. In this article, we’ll discuss how a monthly SIP (Systematic Investment Plan) of Rs 10,000 can turn your child into a Crorepati by the time they are 20, all thanks to the magic of compounding.
The 10-20-15 Investment Formula
The 10-20-15 formula is a simple yet effective way to understand how your monthly SIP can grow over the years:
- 10 represents a monthly SIP of Rs 10,000.
- 20 represents the number of years you invest in this SIP.
- 15 signifies the expected annual return rate, which, in this case, is 15%.
Breaking Down the Numbers
If you start an SIP of Rs 10,000 per month for 20 years, with an average return of 15% per annum, here’s what happens:
- Total Investment: Rs 10,000 per month for 20 years will amount to Rs 24 lakh (10,000 x 12 months x 20 years).
- Capital Gains: With the assumed annual return of 15%, your investment will grow significantly. Over 20 years, you will earn around Rs 1,27,59,550 in capital gains.
- Final Corpus: Adding your total investment and the capital gains, by the end of 20 years, you will have accumulated approximately Rs 1,51,59,550.
How This Helps Your Child Become a Crorepati
By following the 10-20-15 formula, your child can potentially accumulate over Rs 1.5 Crore by the time they turn 20, provided you start investing early. This is the power of compounding at work—small, consistent investments over a long period can yield massive returns.
Why SIP Works So Well
- Compounding Power: The longer you invest, the greater the effect of compounding. Even modest returns can grow exponentially when you leave your investments untouched over the years.
- Flexibility: SIPs are incredibly flexible. You can choose the amount to invest, the frequency (monthly, quarterly, semi-annually), and even pause or increase your investments when needed.
- Discipline: SIPs encourage disciplined investing, making it easier to stick to your financial goals. You don’t need to worry about market fluctuations because you’re investing consistently.
What Makes SIP So Attractive?
SIPs are a great option because they offer flexibility, security, and peace of mind. With SIP, you can start with a relatively low amount, such as Rs 10,000 per month, and watch your wealth grow steadily. Additionally, SIPs allow you to start at any time, pause, or withdraw funds if necessary, making them adaptable to changing financial situations.
Conclusion
If you’re looking to build a significant amount of wealth for your child over the long term, SIPs are an excellent investment strategy. By following the 10-20-15 formula—investing Rs 10,000 per month for 20 years with an annual return of 15%—your child can potentially become a Crorepati by the time they turn 20. The earlier you start, the more powerful the effect of compounding, helping you secure your child’s future while they grow up.