Wealth Guide: A simple investment of Rs 2000-5000 monthly can help fund your child education in next 10 years

Viidyes K Totare, CEO & MD at Archers Wealth Management Pvt Ltd elucidates the best worry-free investment strategy for parents to fund their children’s higher education.

Do you know how much you will have to pay in the next 10 years for your kids’ education? If your kid wants to do a 5-year MBBS from a domestic college? It will be around 50 lakhs for a domestic college. And 2.5 crores for an international college.

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That’s terribly huge, isn’t it?

And if you are admitting your kid to engineering college in a reputed, private deemed university, it will cost you around 15-20 lakh in domestic college and around 1.8 crores.  

What about an MBA? IIMs and top institutes will cost you a minimum of 25 lakhs and international universities will cost you around 1.3 crores.

If you consider government colleges. The top colleges attract extreme competition. And 10 and 20 years from now, the competition is going to increase because the population is going to increase.

And an increasingly higher number of students from rural areas will be opting for higher education.

No matter what career does your kids choose — hotel management, acting, cricket, professional athletics, the cost of higher education is going to be alarmingly high.

As a parent, you’ll never want to compromise with your kids’ education. Because a good education opens tremendous opportunities for your kid for a lifetime.

Is it one of the most critical investments that you make for your kid that directly influence his/her ability to earn and live a financially fulfilling and stable life?

In fact, your kids’ education is the greatest gift you will ever give them.

Now imagine if you have 2-3 kids. How much will you be investing in their education? No, I’m not trying to scare you.

But the point is, are you saving enough to fulfill your child’s dream?

The right investment plan can make all the difference.

Take Advantage Of Systematic Investment Plan (SIP):

SIP allows you to invest a certain amount of money on a regular basis. You invest a fixed sum in a mutual fund scheme. 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 do not have to wait for years to save a good sum of money to start investing.

SIP ensures a disciplined saving and a regular, consistent investment so you do not feel guilty worrying about where your salary or income has flown away at the end of the month.

And best of all, if you stick to it for the long term, you take advantage of the mightiest 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 the money, you are investing a fixed amount every month.

Since your investment is fixed, you get fewer units when the market rises. And receive more units when the market falls. This helps you get a lower average cost per unit.

And instead of a lump sum, your investment is spread out evenly. This further reduces the risk of market volatility. You do not have to time the market.

The secret to harnessing the mightiest force ever to amass wealth.

Let me share with you the simplest formula that will make investing in your kid or kids’ higher education easy and worry-free no matter how small you start today.

Invest in high-quality SIPs and keep them for the long term till they start compounding.

Compounding means generating profit on profit. It’s like your money produces baby money and that baby money produces 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 consistently for 10 years. And consider only 12% compound return (excluding rate of inflation). You will accumulate Rs. 11.50 lakh.

And after 15 years, your investment of ₹ 9.00 lakhs will grow to ₹ 25.23 lakhs* @ 12% p.a. That means it has more than doubled in another 5 years.

And if you keep investing for 20 years, your investment of ₹ 12.00 lakhs will grow to a whooping ₹ 49.96 lakhs.

Now here it gets exciting, instead of getting just a 12% compound return, you get compounding profit to 20%, 25%, 30% or even more.

Let’s consider a 20% composing profit return.

After 20 years, your investment of ₹ 12.00 lakhs will grow to ₹ 1.58 Cr* @ 20% p.a.

That means you will never ever have to worry about your kid’s higher education. Imagine that feeling of simply writing off a cheque and clearing your kids’ education fee.

You do not have to take expensive loans. You do not have to put your kid into debt even before they start to earn. I’m sure that would be one of the greatest moments of pride for you as a father or mother.

Now, depending on your age, your kid’s age, your saving capacity, you can allocate a certain amount in SIP.

Remember, you should invest in high-quality SIPs.

Invest in SIP that safeguards your principal, significantly lowers the risk and has the potential to earn you a compounding profit return of 20% or above.

Is it possible to get that much return? The answer is a resounding yes because I have been helping my clients get those kinds of returns for over a decade now.

It is realistic and doable, more so today, as India is one of the fastest-growing economies in the world.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)