When you’re a parent, planning for your child’s future becomes second nature — especially when it comes to something as critical as their higher education. Like many others, I wanted to be disciplined about saving and investing, so I chose the ELSS SIP route (Equity Linked Savings Scheme through a Systematic Investment Plan). It seemed like the perfect blend of wealth creation and tax-saving.
But there was one major catch I hadn’t understood well — and I hope sharing my experience helps other parents avoid the same surprise that left me scrambling.
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The Plan: Build a Short-Term Education Corpus
In January 2020, I started an ELSS SIP of ₹10,000 per month, hoping to build a substantial corpus in three years. My expectation was that I’d be able to withdraw the full amount in early 2023, just in time to pay for some higher education expenses for my child.
The math in my head was simple:
- ₹10,000/month × 36 months = ₹3.6 lakhs invested
- Assuming growth, I was expecting over ₹4 lakhs by early 2023
Sounds reasonable, right? I felt confident and proud of myself for planning ahead.
The Reality: ELSS Comes with a Rolling Lock-In
Then came the moment of truth. What I didn’t realize (and what no one had clearly explained to me) is that ELSS funds come with a 3-year lock-in period for each SIP installment — not the entire investment as a whole.
That means:
- The amount I invested in January 2020 became eligible for withdrawal in January 2023
- The February 2020 SIP was eligible only in February 2023
- And so on…
So, by February 2023, when I needed funds for my child’s education, only two SIPs (Jan and Feb 2020) had completed the 3-year lock-in.
This meant I could only withdraw around ₹20,000-₹25,000 — not the entire ₹3.6 lakh I had expected and desperately needed. I remember the sinking feeling in my stomach when I realized what had happened.
Why This Matters (And Why I’m Still Upset About It)
If you’re planning for a fixed expense like college fees, where you need access to the entire corpus at once, this structure can create serious cash flow issues. I had to scramble to arrange funds from other sources, which was stressful and financially disruptive.
In hindsight, ELSS was a great investment — but not the best fit for a short-term goal like this, unless the entire amount was invested upfront instead of through SIPs. I wish someone had taken the time to explain this crucial detail to me.
What’s the Solution If You’re Already In This Situation?
If you’re already in this situation like I was, here’s what you need to know:
- Your full investment will be available for withdrawal only after your last SIP completes 3 years.
- For me, since I invested till December 2022, my final SIP unlocks in December 2025.
- So, January 2026 is the first time I can access my entire ELSS investment.
Until then, the funds will unlock month-by-month, and I can redeem each installment only when it completes the 3-year lock-in.
I’ve had to adjust my expectations and financial planning accordingly, which hasn’t been easy.
Difference Between Pause and Delete (Stop/Cancel) SIP
A Systematic Investment Plan (SIP) in mutual funds allows for regular, automated investments. If your financial situation changes, you may need to either pause or delete (stop/cancel) your SIP. Here’s a clear comparison:
| Feature | Pause SIP | Delete/Stop SIP |
|---|---|---|
| Definition | Temporarily suspends your SIP for a fixed period, after which it resumes automatically | Permanently stops your SIP; no further installments are deducted |
| Duration | Limited period (e.g., 3-12 months depending on the fund house) | Indefinite; SIP ends unless you start a new one |
| Process | Request to pause via AMC/online portal; specify pause period | Request to stop/cancel via AMC/online portal; SIP is terminated |
| Effect on Investment | Existing investments remain and continue to grow; no new units bought during pause | Existing investments remain and continue to grow; no new units bought after cancellation |
| Resumption | SIP resumes automatically after pause period ends | SIP does not resume automatically; must start a new SIP to invest again |
| Use Case | Temporary cash crunch, short-term emergencies, or planned breaks | Long-term change in investment plan, switching funds, or goal achieved |
| Flexibility | High (can resume without re-registration) | Low (need to set up a new SIP to restart) |
A Better Way to Plan Ahead
If you’re thinking of using ELSS for a similar goal, please consider the following (lessons I learned the hard way):
- Understand the Lock-In: Each SIP has a separate 3-year lock-in — it’s not based on the date you started the SIP.
- Invest Lumpsum (if possible): If you know you’ll need the funds in exactly 3 years, a lumpsum ELSS investment might work better than monthly SIPs.
- Match Investment to Goal Timeline: For short-term goals (like education fees due in 3-5 years), consider hybrid funds, debt funds, or fixed deposits along with equity options for diversification and liquidity.
- Consult a financial advisor: They can guide you based on your specific goals and risk appetite. I wish I had done this before jumping in.
Final Thoughts
I still believe ELSS is a powerful tool — especially for disciplined, long-term investing with tax benefits. But like all tools, it needs to be used with full understanding of how it works.
As parents, we often jump into decisions with good intentions — but sometimes, even a smart plan can trip you up if you don’t catch the finer details. Don’t be afraid to ask questions, no matter how basic they seem. Your financial advisor should be willing to explain everything clearly.
I hope sharing my mistake helps other parents avoid the same situation. After all, we’re all just trying to give our children the best possible future.
Disclaimer
This blog is based on a personal experience shared by a parent with educatedtimes.com. It is being published to raise awareness about how ELSS SIPs work, especially in the context of goal-based investing.
We are not offering financial advice, and we recommend speaking with a certified financial advisor for any investment decisions.