A monthly SIP can build a sizeable university fund over 12 years, but leaving the money in equities until fees are due could expose families to a damaging market fall.
For families saving for a child’s university costs, the biggest challenge is often not starting early but knowing when to stop taking risk. Higher education can be expensive whether the student is heading into engineering, medicine, an MBA or overseas study, and NDTV Profit’s calculation shows why many parents turn to systematic investment plans, or SIPs, to build a dedicated fund over time. In the example given, a monthly investment of Rs 10,000 over 12 years, assuming a 12% annual return, could grow to a little more than Rs 32 lakh, although that outcome is only an estimate and not a promise.
The attraction of a SIP is straightforward: it makes saving routine and uses the effect of compounding, where gains can themselves begin to earn returns. Guidance from mutual fund educators such as Paisabazaar and Mutual Fund Advisor explains that a SIP is not a product in itself but a way of investing regularly into a chosen mutual fund scheme. It also helps investors spread purchases over time, a process often described as rupee-cost averaging, which can reduce the impact of buying at a single market peak.
That same market exposure, however, is the reason advisers usually warn against leaving education money in equities until the last possible moment. Equity funds can deliver strong long-term growth, but they can also fall sharply just when fees are about to be paid. For a goal with a fixed date, such as college admission, the risk is not abstract: a bad market stretch in the final year could leave parents short of the amount they need. That is why a staged approach is generally more sensible than an all-or-nothing decision.
A more careful strategy is to use equities for the early years, then reduce risk as the deadline gets closer. With roughly 12 years to save, the first stage can focus on growth through equity-oriented funds, depending on a family’s tolerance for volatility. Over the next few years, part of the accumulated corpus can be shifted into lower-risk instruments such as high-quality debt options or bank deposits. In the final stage, the money required for each fee payment should be kept in stable, liquid investments rather than left exposed to the stock market. In practice, that means the SIP can stay in place for discipline, but the portfolio itself should gradually become safer as the college bill comes into view.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
