Investing in SIP and mutual funds for twins' education with limited income?

Ans: You have a stable job with a net salary of Rs 45,000. You are already committed to chits, which takes up a significant portion of your income. With two children, who are just one month old, you’re thinking ahead. You want to plan for their future, especially for when they turn 22 years old.

Evaluating Your Current Commitments

Chit Fund Involvement: You’re investing Rs 25,500 in regular chits. While chits offer liquidity, they may not be the best for long-term wealth creation. The 1% interest is relatively low compared to other investment options.

Remaining Salary: After paying for chits, you have Rs 19,500 left. This amount needs to cover your living expenses and potential investments.

Starting SIPs and Mutual Funds

Starting Small: Begin with SIPs that fit your budget. Even starting with a small amount, say Rs 2,000 to Rs 3,000 per month, can make a difference over time.

Choosing the Right Funds: For long-term goals like your children's education, consider equity-oriented funds. These have the potential to grow significantly over 22 years.

Avoid Index Funds: Index funds track the market but lack flexibility. Actively managed funds can adapt to market changes and may offer better returns.

Planning for Your Children's Future

Goal-Based Investing: You want income when your children turn 22. This aligns with their higher education. SIPs in equity mutual funds can help build a solid corpus over time.

Increase Investments Gradually: As your income grows or once you complete your chit obligations, increase your SIP contributions. This will boost your investment corpus.

Regular Fund Reviews: Work with a Certified Financial Planner to review your investments regularly. This ensures they are on track to meet your long-term goals.

Understanding the Drawbacks of Direct Funds

Limited Guidance: Direct funds may seem cheaper but require active management by you. This can be challenging without financial expertise.

Benefits of Regular Funds with CFP Guidance: Investing through regular funds managed by a Certified Financial Planner provides expert advice. It helps in selecting the right funds and managing risks.

Maximizing Your Savings

Emergency Fund: Ensure you have an emergency fund. It should cover at least 3 to 6 months of your expenses. This can protect your investments in case of unexpected financial needs.

Avoid High-Cost Debt: If possible, avoid high-interest loans or debt. Focus on investing your savings in growth-oriented options like mutual funds.

Final Insights

You’re on the right track by planning for your children’s future. Starting SIPs in equity mutual funds can help you build a substantial corpus over the next 22 years. Keep your goals in mind, and invest steadily. Gradually increasing your SIP contributions and working with a Certified Financial Planner will ensure your investments are aligned with your objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in