Parents often think that saving thousands of rupees every month is necessary to build a big fund, but the law of compounding proves that time and consistency are more important than the amount. Teaching children the importance of digital savings and investments along with putting coins in their piggy banks right from childhood can become the strongest financial foundation for their future. If a child learns to save only ₹ 10 every day, then this savings becomes ₹ 300 in a month. Even this small amount can be converted into a large corpus in the long run through Systematic Investment Plan (SIP) in Mutual Funds.
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Daily Savings: ₹10 per day
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Monthly SIP Investment: ₹300 per month
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Annual Investment: ₹3,600 per year
SIP in mutual funds can be started with as little as ₹100 or even ₹250 per month with many leading fund houses. When this amount of ₹300 is invested every month in an equity mutual fund (like large-cap, flexi-cap or index fund), market fluctuations are balanced out over the long term and the double benefit of rupee cost averaging and compound interest is achieved.
The future wealth of a mutual fund SIP is calculated by the following formula:
$$FV = P \times \left[ \frac{(1 + i)^n – 1}{i} \right] \times (1 + i)$$
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$FV$ (Future Value): Total expected fund to be received on maturity
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$P$ (Periodic Investment): Monthly investment amount (here ₹300)
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$i$ (Periodic Interest Rate): Monthly Return Rate ($\text{Annual Return} / 12 / 100$)
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$n$ (Total Periods): Total number of months ($\text{years} \times 12$)
The table below gives the detailed breakdown of the total investment and estimated fund generation at different return rates based on tenures of 10 years, 15 years and 20 years:
| Investment Period (Years) | Total Invested | Fund projected at 10% annual return | Fund projected at 12% annual return | Fund projected at 15% annual return |
| 10 years (120 months) | ₹36,000 | ₹61,966 | ₹69,725 | ₹83,587 |
| 15 years (180 months) | ₹54,000 | ₹1,25,380 | ₹1,51,373 | ₹2,02,963 |
| 20 years (240 months) | ₹72,000 | ₹2,27,811 | ₹2,99,744 | ₹4,54,781 |
It is clear from the table that the total accumulated capital in 20 years is only ₹72,000 it occurs. But if the fund gives an average historical annual return of 12%, this amount would grow to approximately ₹3,00,000 It happens. This amount increases to an aggressive equity return of 15%. ₹4,54,781 It reaches.
The biggest part of this return is not the principal amount, but the interest earned on it (Compounding Interest), which generates a profit of more than 5 times the total investment in 20 years.
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Clear Savings Jar: Give children a transparent jar instead of a piggy bank so that they can see their savings growing before their eyes.
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Minor Mutual Fund Account: Parents can open a minor folio in the name of the child under their guardianship. With this, after the child completes the age of 18 years, the entire accumulated fund can be used for the child's higher studies or starting a career.
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Step-Up SIP: As the child's age increases and pocket money increases, make a habit of increasing (step-up) the investment by 10% every year. If ₹ 300 is increased by just 10% every year, then after 20 years the same fund can cross Rs 8 lakh to 10 lakh.