Power of compounding: Here's how much wealth PPF investment of ₹5,000 per month can build for you over 15-50 years

The public provident fund (PPF) is a top choice when it comes to long-term financial planning. Launched by the Centre in 1986, it is a reliable, low-risk government backed savings scheme with consistent and guaranteed returns and can be used to meet financial goals such as funding of wedding, children's education abroad, buying a house, retirement fund or even building wealth. Steady investment in PPF over a long term is a sure way of building wealth using the power of compounding.

A PPF account can be easily opened at any post office or bank branch across India by submitting an application form, photo and mandated KYC documents. For minors, the parent / legal guardian can open an account, which must be converted to major status once the primary account holder turns 18 years of age.

Parents can consider the instrument as a wealth builder for their child over the long-term future. Today, we look at how much savings ₹5,000 per month in PPF gives you over a period of 10 to 50 years.

PPF: How much ₹5,000/month gives over 10-50 years?

Notably, the earlier you start investing, the better your returns for the same amount invested. This is because of the power of compounding. For example, if you begin investing in the year your child is born and they remain invested for 50 years, at current interest rate of 7.1%, the fund will accumulate nearly ₹3 crore.

Below is how the calculation works out for investment of ₹5,000 per month over a period of 15, 20, 30, 40 and 50 years:

• If you start your child's investment at age 0: Investing ₹5,000 per month over 50 years totals to ₹30 lakh deposited and earns interest of more than ₹2.40, for total maturity payout of over ₹2.70 crore at age 50.
• If you start your child's investment at age 10: Investing ₹5,000 per month over 40 years totals to ₹24 lakh deposited and earns interest of more than ₹1.07 crore, for total maturity payout of over ₹1.31 crore at age 50.
• If you / your child starts their investment at age 20: Investing ₹5,000 per month over 30 years totals to ₹18 lakh deposited and earns interest of more than ₹43.80 lakh, for total maturity payout of over ₹61.80 lakh at age 50.

• If you / your child starts their investment at age 30: Investing ₹5,000 per month over 20 years totals to ₹12 lakh deposited and earns interest of more than ₹14.63 lakh, for total maturity payout of over ₹26.63 lakh at age 50.
• If you / your child starts their investment at age 35: Investing ₹5,000 per month over 15 years totals to ₹9 lakh deposited and earns interest of more than ₹7.27 lakh, for total maturity payout of over ₹16.27 lakh at age 50.

Power of compounding can make you a crorepati

As seen with the above calculations, delaying investment by a few years can have significant impact on how much wealth you can build with minimal investment. Notably, investing after age 25 would require you to at least double the monthly input to reach crorepati status.

And while reaching the “crorepati” could be achieved by gradually increasing your investment amount, time is the biggest factor when it comes to capturing the full benefit of compounding. Further, investing larger amounts monthly in PPF also may not be feasible or tax beneficial for most salaried individuals.

Thus, to set yourself or your children up for success, a key factor is to start early and remain invested for extended period in order to make the most of your investment.

Disclaimer: This story is for educational purposes only. We advise investors to check with certified experts before making any investment decisions.