Mutual Funds for children: How can I accumulate Rs 2 crore for my child’s education in 15 years? Check details

In recent years, the cost of education has been rising at an alarming rate. While general inflation remains around 5-5.5%, educational expenses have surged to approximately 11-12%. Projections suggest that these costs could potentially double every six to seven years, imposing a substantial financial burden on families. 

Illustrating educational inflation, a private engineering college that charged Rs. 1 lakh annually in 2010 now costs Rs. 3 lakhs in 2022, showing a 200% increase. When sending a child abroad, consider rupee depreciation of 4-5% yearly besides inflation for accurate expenditure planning.

The rationale for investing in children’s funds continues to be a topic of active debate. Experts argue that the child-focussed schemes offer a practical and potentially profitable method for saving towards specific financial objectives, such as funding a child’s education. Furthermore, they highlight that the associated lock-in periods can help investors maintain financial discipline and deter impulsive withdrawals.

Business Today spoke to Jay Shah, Founder and CEO, Finwisor, for his advice on investment in mutual funds, especially for your child’s education. Here are the top points:

“SIPs are the best way to start investing in your child’s education. SIPs are ideal for navigating market fluctuations and are easily accessible through mutual funds. They are cost-effective, requiring no large initial investment to begin,” Shah said.

Here’s a plan of investment

The above table shows the starting amount of SIP (in Thousands) required for generating Rs 2 Crores in 15 years. The columns represent the rate of returns. While the rows depict the yearly % increase in SIPs.

The rates of returns: 6%, 10%, 12% and 15% are taken as they are indicative of different asset class returns – FDs, Sovereign Gold Bonds, Equity Mutual Funds and Other strategies, respectively.

If Mr. A is does not want to increase his monthly SIPs (0% Step Up) and generate 6% returns on the investment, he should start with Rs 69.37K every month to be able to reach a corpus of Rs 2 crore in 15 years

If Mr. B is able to increase his SIPs by 5% every year and generate 12% returns on the same, he should start with Rs 32.30K every month to be able to reach a corpus of Rs 2 Crores in 15 years

If Mrs. C is able to increase his SIPs by 10% every year and generate 15% returns on the same, she should start with Rs 19.49K every month to be able to reach a corpus of Rs 2 Crores in 15 years

1.    The above table is a simplified version for ease of investors. It does not consider the tax implications on the investments.
2.    The table helps guide investors build a corpus of Rs 2 Crores in 15 years. However, if the present cost of child’s education is Rs 2 Crores, then the target amount should be inflation adjusted.
3.    The returns of varied asset classes over a tenure of 15 yrs are unlikely to remain constant. That will change the monthly investments required.


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