- Date : 02/09/2022
- Read: 3 mins
Find out how much you need to save and invest every month for an education expense corpus of Rs 2 crores
A children's education fund might seem out of reach, considering the high costs of master’s degrees. If you plan to send your child abroad, you might need to shell out a fortune. But what if we told you that you could reduce the burden by starting early? You will be relieved. Let us introduce the compounding function and how if you start early, you will be able to achieve your goals and targets.
Saving for children’s education is not easy. You need to first figure out the corpus you require. Make sure that you factor in the inflation over the years. Your child’s education might be very expensive in the future. So, first, figure out the corpus required for your child’s education. Let us assume that the corpus is Rs 2 crores. Now when you start saving is very important. Read to know more…
Related: How to plan for child education expenses?
How to Save a corpus of Rs 2 crores for childs education expenses?
To save a corpus of Rs 2 crores, it depends on two main factors:-
- Time in your hand.
- CAGR returns are expected.
We assume a 12% CAGR which is the normal return expected from equity mutual funds in India. After factoring in 12% CAGR returns, we have calculated the SIP amount required to achieve the goal of a corpus of Rs 2 crores. We assume that you require the funds when your child turns 20.
- Scenario 1: You start saving immediately when your child is born. Then you need to save a sum of Rs 20,000 per month. In 20 years, when your child turns 20, you will have a corpus of Rs 2 crores.
- Scenario 2: You start saving when your child turns 5. Now you need to save Rs 39,600 per month to get your corpus of Rs 2 crores. This means that you need to save almost double per month to get the same corpus.
- Scenario 3: Assuming that you start saving when your child turns 10, then you need to save Rs 86,000 per month to get a corpus of Rs 2 crores. This means that if you miss by five more years, you will need to save more than double per month.
- Scenario 4: If you start saving when your child turns 15, you might need to save a fortune. You will need to save Rs 2,42,500 per month.
This means that you should start saving early. Also, if you have more than one child, you will need to save accordingly. Saving and investing is a habit which should be started early to benefit from the compounding of money.
Related: How prepared are you to meet your child’s education cost?
Saving for a child’s education is important, and you should start saving early. As seen in the examples above, the later you start, the more you need to save. If you start saving when your child is born, you might need to save Rs 20,000 per month. If you start saving in the last five years only, you will need to save Rs 2,42,500 per month. Thus you might need to save more than 12 times.
Related : How to finance your child’s higher studies with education loan?
How To Plan For Your Child's Education? | Master Your Money
A children's education fund might seem out of reach, considering the high costs of master’s degrees. If you plan to send your child abroad, you might need to shell out a fortune. But what if we told you that you could reduce the burden by starting early? You will be relieved. Let us introduce the compounding function and how if you start early, you will be able to achieve your goals and targets.
Saving for children’s education is not easy. You need to first figure out the corpus you require. Make sure that you factor in the inflation over the years. Your child’s education might be very expensive in the future. So, first, figure out the corpus required for your child’s education. Let us assume that the corpus is Rs 2 crores. Now when you start saving is very important. Read to know more…
Related: How to plan for child education expenses?
How to Save a corpus of Rs 2 crores for childs education expenses?
To save a corpus of Rs 2 crores, it depends on two main factors:-
- Time in your hand.
- CAGR returns are expected.
We assume a 12% CAGR which is the normal return expected from equity mutual funds in India. After factoring in 12% CAGR returns, we have calculated the SIP amount required to achieve the goal of a corpus of Rs 2 crores. We assume that you require the funds when your child turns 20.
- Scenario 1: You start saving immediately when your child is born. Then you need to save a sum of Rs 20,000 per month. In 20 years, when your child turns 20, you will have a corpus of Rs 2 crores.
- Scenario 2: You start saving when your child turns 5. Now you need to save Rs 39,600 per month to get your corpus of Rs 2 crores. This means that you need to save almost double per month to get the same corpus.
- Scenario 3: Assuming that you start saving when your child turns 10, then you need to save Rs 86,000 per month to get a corpus of Rs 2 crores. This means that if you miss by five more years, you will need to save more than double per month.
- Scenario 4: If you start saving when your child turns 15, you might need to save a fortune. You will need to save Rs 2,42,500 per month.
This means that you should start saving early. Also, if you have more than one child, you will need to save accordingly. Saving and investing is a habit which should be started early to benefit from the compounding of money.
Related: How prepared are you to meet your child’s education cost?
Saving for a child’s education is important, and you should start saving early. As seen in the examples above, the later you start, the more you need to save. If you start saving when your child is born, you might need to save Rs 20,000 per month. If you start saving in the last five years only, you will need to save Rs 2,42,500 per month. Thus you might need to save more than 12 times.
Related : How to finance your child’s higher studies with education loan?
