Every person spends or wants to spend every penny of his hard-earned money to shape the future of his children. However, if not spent in the right direction, the result is only a cipher. If you invest a small part of your hard-earned money in SIPs on a regular basis, then your child’s future will not only be brightened, but can also become the owner of crores. There is also a simple SIP formula for this, which is called 5x12x40. However, half of India does not know this formula. Once you know this formula, you will also start an SIP of at least Rs 5000 every month in the name of your child. Let’s get to know the 5x12x40 formula of SIP.
What is SIP?
SIP stands for Systematic Investment Plan, which is a convenient and disciplined way to invest in mutual funds. It allows you to invest a fixed amount at regular intervals (monthly, quarterly or annually). SIPs aim to convert small investments into a larger wealth over time, with the benefit of compounding and the strategy of averaging costs.
Benefits of SIP
Discipline to Investing: Investing regularly builds financial discipline.
Small investment, big profit: A small amount can be started with Rs 500.
Cost of Rupee Average: Despite market fluctuations, the average cost of your investment decreases.
Advantage of compounding: Investors earn interest on interest from long-term investments.
Flexibility: In SI, you can increase, decrease, or stop investing.
How does SIP work?
You select a mutual fund scheme and decide the amount of investment.
Every month, on the scheduled date, this amount is deducted from your bank account and invested in mutual funds.
The units are purchased with the money invested, the number of which depends on the NAV of that day.
Over time, the investment increases and returns are available according to the performance of the fund.
What is SIP’s 5x12x40 formula?
You can understand it in simple words that this formula belongs to your child. This means that when your child is 5 years old, you will have to deposit Rs 5000 every month in his/her name. It is important that you have to deposit 5000 rupees every month continuously for 40 years. This deposit will get 12% return annually. When your child turns 45, he will receive Rs 6 crore.
How to become a 5 Year-old millionaire with SIP
Even a 5-year-old child can get Rs 6 crore by investing through SIP. For this, you have to deposit 5000 rupees every month till the age of 18 years. When your child turns 18, this SIP account will be transferred to his name and he will automatically deposit his money every month. He will have to deposit Rs 5000 regularly every month till he completes 40 years of age. Then when he turns 40, he will get around Rs 6 crore.
How much will be the return on SIP?
Investing in equity mutual funds through SIP gives an average return of 12% per annum. Since your child is 5 years old, when he is 40 years old, you will deposit Rs 5000 every month in about 480 installments in his name. By doing this, 24 lakh rupees will be deposited in his account. It will get a return of 12%.
