Mutual fund calculator: Currently, cost of higher education is around 10 lakh. If we assume 10 per cent inflation for next 8 years, then the future cost of higher education comes at around ₹22 lakh, say experts
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Mutual fund calculator: There is nothing more important than securing future of your child and it is possible through proper education. The way cost of education is soaring, it's important for parents to make proper financial planning for higher studies of their child. According to tax and investment experts, making investments as early as possible is always advisable but, in case, if someone is late in financial planning for higher education of one's child, mutual fund SIP can be a good investment instrument. They said that one need at least 8-10 years to accumulate enough wealth for higher studies of one's child. So, even when you child is 10 years old, you have enough time to amass enough wealth for the higher studies of your child.
Asked about the investment tool that will help an investor accumulate enough wealth for one's 10 years old child's higher education; Vinit Khandare, Founder & CEO at MyFundBazaar India Private Limited said, "If an investor wants to invest for higher studies of a 10 years, then there is around 8 year time left for him to meet his or her investment goal as higher studies generally begins when a child becomes 18 years old. For such investors, mutual funds SIP can be a good option as it will allow the investor to create big amount with small monthly investments." He said that education inflation is around 10 per cent and hence equity mutual funds are better suited as it would give at least 12 per cent return in medium to long-term time-horizon.
Asked about the investment goal that one should look at while making investment for the higher studies of one's 10 years old child, Vinit Khandare of MyFundBazaar India Private Limited said, "Currently, cost of higher education is around 10 lakh. If we assume 10 per cent inflation for next 8 years, then the future cost of higher education comes at around ₹22 lakh. So, one should look at accumulating ₹22 lakh in next 8 years while investing for higher studies of one's 10 years old child."
Assuming 12 per cent return on monthly SIP for 8 years, the mutual fund return calculator suggests that an investor would require ₹14,000 monthly SIP investment to meet this investment goal.
Advising investors to use annual SIP step-up to keep the monthly SIP lower; Kartik Jhaveri, Director — Investments at Transcend Capital said, "Starting a mutual fund monthly SIP of ₹14,000 might not be easy for an investor. But, one can use annual step-up of 10 per cent in one's monthly SIP amount. It will enable the investor to bring down one's monthly SIP at best possible lowest levels."
Assuming 12 per cent return on monthly SIP for 8 years with 10 per cent annual step-up, the mutual fund SIP calculator says that an investor would require ₹10,500 monthly SIP to meet the investment goal of ₹22 lakh.
Harshad Chetanwala, Co-Founder at MyWealthGrowth.com said, "Another way to plan this investment is not to wait till the end of the 8th year to redeem the money for the goal. A better strategy would be to invest up to 7 years and then start de-risking the investment through SWP from the beginning of the 8th year so that the accumulated amount does not get affected if the market is volatile or not in favour during the year of financial goal."
Asked about some mutual funds that one can look at for monthly SIP investments, Vinit Khandare of MyFundBazaar India Private Limited said that ABSL Flexi Cap and ICICI balanced fund can be a good option for an investor looking to invest for the higher studies of one's child.
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