Wealth guide: A simple investment of Rs 2000-5000 per month can help fund your child’s education over the next 10 years
Viidyes K Totare, CEO and MD at Archers Wealth Management Pvt Ltd elucidates the best worry-free investment strategy for parents to finance their children’s higher education.
Do you know how much you will have to pay in the next 10 years for the education of your children? If your child wants to do 5 year MBBS in national college? It will be around 50 lakhs for a national college. And 2.5 crores for an international college.
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It’s terribly huge, isn’t it?
And if you admit your child to an engineering school in a reputable private university, it will cost you around 15 to 20 lakh in a national university and around 1.8 crores.
What about an MBA? IIMs and top institutes will cost you at least 25 lakhs and international universities will cost you around 1.3 crores.
If you consider government colleges. The best colleges attract extreme competition. And in 10 and 20 years, the competition will increase because the population will increase.
And more and more students from rural areas will opt for higher education.
Whatever career your children choose – hotel management, theatre, cricket, professional athletics – the cost of higher education will be alarming.
As a parent, you will never want to compromise with your children’s education. Because a good education opens great opportunities for your child for life.
Is it one of the most critical investments you make in your child that directly influences their ability to earn and live a financially fulfilling and stable life?
In fact, educating your children is the greatest gift you can give them.
Now imagine if you have 2-3 children. How much are you going to invest in their education? No, I’m not trying to scare you.
But the fact is that you are saving enough to make your child’s dream come true?
The right investment plan can make all the difference.
Take advantage of the Systematic Investment Plan (SIP):
SIP allows you to regularly invest a certain amount of money. You invest a fixed amount in a mutual fund. Mutual funds are market instruments investing funds in stocks, bonds, commodities, etc.
You can start today with a minimum investment of Rs 500 per month and increase it gradually. You don’t have to wait years to save a good amount of money to start investing.
SIP ensures disciplined saving and steady, consistent investing so you don’t feel guilty about worrying about your salary or income skyrocketing at the end of the month.
And best of all, if you stick with it for the long term, you enjoy the most powerful power of wealth generation. I’ll show you how in a minute.
First, let me show you how SIP works.
It’s like a recurring bank deposit, but instead of just depositing money, you invest a fixed amount each month.
Since your investment is fixed, you get fewer units when the market goes up. And receive more units when the market goes down. This allows you to obtain a lower average cost per unit.
And instead of a lump sum, your investment is spread evenly. This further reduces the risk of market volatility. You don’t have to time the market.
The secret to harnessing the most powerful force ever created to amass wealth.
Let me share with you the simplest formula that will make investing in your child or children’s higher education easy and worry-free, no matter how big your start today.
Invest in high quality SIPs and hold on to them for the long term until they start to get worse.
Capitalization means generating profits on profits. It’s as if your money produces baby money and that money produces even more baby money. And it becomes an unstoppable chain reaction.
Let me give you a very conservative example.
If you invest Rs 5000 per month regularly for 10 years. And consider only 12% compound return (excluding inflation rate). You will accrue Rs. 11.50 lakh.
And after 15 years your investment of ₹9.00 lakhs will grow to ₹25.23 lakhs* @ 12%pa That means it has more than doubled in 5 years.
And if you continue to invest for 20 years, your investment of ₹12.00 lakhs will increase to ₹49.96 lakhs.
Now here it gets exciting, instead of just getting a compound return of 12%, you get a compound profit of 20%, 25%, 30% or even more.
Consider a compounding profit return of 20%.
After 20 years, your investment of ₹12.00 lakhs will increase to ₹1.58 Cr* at 20% per annum
This means that you will never have to worry about your child’s higher education. Imagine that feeling of just writing off a check and paying your kids’ tuition.
You don’t have to take out expensive loans. You don’t have to put your child in debt before they even start making money. I’m sure it would be one of the proudest moments for you as a father or mother.
Now, depending on your age, the age of your child, your savings capacity, you can allocate a certain amount in SIP.
Remember that you need to invest in high quality SIPs.
Invest in SIP which protects your capital, significantly reduces risk and has the potential to earn you a compound return of 20% or more.
Is it possible to get that much back? The answer is a resounding yes, as I have been helping my clients achieve these kinds of returns for over a decade now.
This is realistic and doable, especially now that India is one of the fastest growing economies in the world.
(Disclaimer: Opinions/suggestions/advice expressed here in this article are investment experts only. Zee Business suggests its readers consult their investment advisors before making any financial decisions.)