SIPs or child insurance: What’s best for building an education corpus?

Planning for your child’s education? You have two main options: Systematic Investment Plans (SIPs) in mutual funds or child insurance plans. While child insurance offers tax benefits and premium waivers in case of emergencies, it often comes at a high cost. SIPs, on the other hand, provide flexibility and potentially higher returns.

A monthly SIP of ₹7,700 in aggressive equity mutual funds can grow to ₹17.8 lakh in 10 years, assuming a 12% annual return. In the last two years, shifting funds to low-risk options like fixed income or hybrid funds can help reach the ₹20 lakh goal.

To ensure financial security, a separate term insurance plan is recommended instead of bundled child insurance. This approach keeps costs low while offering better protection.

Tax planning is crucial. Investing in your child’s name can provide tax exemptions when they turn 18, reducing tax liabilities on withdrawals.

Rather than opting for expensive child insurance, a combination of SIPs and term insurance offers higher returns, lower costs, and greater flexibility. Start early, stay disciplined, and adjust contributions to account for inflation.

This strategy ensures a secure financial future for your child’s education while maximizing growth potential.