← Blog

Baby on the Way? A 0-to-18 Money Plan for Your Child’s First Year

Life Goals · 19 October 2026 · Plan Our Future

Start with protection first, then a ₹7,000–18,000/month education SIP, in that order. Your child''s best financial start is you being insured, with a medical buffer, before any investing begins.

The 18-year runway is long enough for equity to work, but only if the base is in place. Here is the sequence we suggest.

Step 1: Protect the income that funds everything

The child depends on your income for 20+ years. Before a single rupee goes to a "child plan":

• Term cover of roughly 10–15x annual income for each earning parent (cover until the child is financially independent).
• Health cover that includes maternity and newborn expenses. Check the waiting period; many policies make you wait 2–4 years before maternity is payable, so buy early. Add the baby to the family floater at birth.
• A bigger emergency fund, typically 6–9 months of expenses instead of 3–6, since expenses and income risk both rise.

Avoid bundled "child plans" that mix insurance and investment. Under current rules the cost is usually higher than a pure term plan plus a separate SIP; confirm the terms before buying.

Step 2: Know the 18-year number

Education inflates faster than general prices; we assume about 10% a year. At an assumed 12% long-term equity return, a monthly SIP started at birth grows roughly 7.7x per ₹1,000 a month over 18 years (an assumption, not a promise).

Cost of higher education today	Cost at age 18 (10% inflation)	Monthly SIP needed from birth
₹10 lakh	~₹55 lakh	~₹7,300
₹25 lakh	~₹1.4 crore	~₹18,000
₹40 lakh	~₹2.2 crore	~₹29,000

If the number looks heavy, do not abandon it. Start with what you can and raise the SIP by 10% each year as your salary grows; that closes much of the gap.

Step 3: Split the goal by time, not by child

Treat the child as several goals, each with its own SIP:

1. Schooling (years 3–15): costs are near-term and recurring, so keep this in a mix of debt and equity.
2. Higher education (year 18): the big one; start equity-heavy and de-risk gradually.
3. Marriage or first-career support (optional): a separate, later goal. Do not mix it into the education SIP.

The equity share should fall as each goal nears. In the final 3–4 years, shift the education corpus toward debt so a market fall at age 17 cannot derail admission fees.

Mistakes new parents make

• Putting everything in one "child" fund with no date or glide path.
• Skipping term insurance because "savings are enough".
• Locking the baby''s money in long-tenure plans that penalise early exit.
• Forgetting that grandparent gifts and cash come in lumpy; invest them as a lump sum into the goal bucket.

In the Plan Our Future app you can add the child''s education as its own goal, see the SIP it needs and link a real SIP to it, so each goal stays separate.

This is educational, not personalised advice. For tax benefits on any child-linked investment, check the current year''s rules or ask a CA.

FAQ

Q. When should I start investing for my child?

A. From the first year, after term and health cover are in place. An early start means a smaller monthly SIP for the same goal.

Q. Should I buy a child plan from an insurer?

A. Most combine insurance with low-return investing. Pure term cover for you plus a separate SIP is usually cleaner and cheaper; compare the exact terms first.

Q. How much equity is right for an 18-year goal?

A. Early years can be equity-heavy, then reduce it step by step as the goal nears. The exact mix depends on your risk comfort.

Q. Is ₹5,000 a month enough?

A. At an assumed 12% return it could reach roughly ₹38 lakh in 18 years, which covers some courses but not all. Step it up yearly to close the gap.

Plan Our Future · AMFI-registered Mutual Fund Distributor (ARN-360754). Mutual Fund investments are subject to market risks, read all scheme related documents carefully.