Mutual fund calculator: A monthly sip you need for your child’s college education

Mutual fund calculator: The increase in student loans can exacerbate the financial situation of parents who could not plan for their child’s education. High interest rates on student loans also pose a big challenge to these parents. It is therefore very important to plan your investment goals and design a financial strategy to finance your child’s higher education. However, while investing for the higher education of his children, the investor should keep inflation in mind.

Emphasizing the importance of maintaining inflation for an investor; Pramod Chandrayan, co-founder and chief purchasing officer at FinMapp, said, “Right now, the average annual inflation growth is around 6%. Thus, investing in products capable of fighting rising inflation is key to improving your preparedness for future events. “

Speaking of average inflation, one must keep while planning the higher education of children; Pankaj Mathpal, MD and CEO of Optima Money Managers, said, “When planning for your child’s education, it is not advisable to keep inflation at a normal average, because the inflation of the education is much higher than the average annual growth rate of inflation. I suggest investors assume an annual growth rate of education inflation of around 10% while providing for higher education for children. . »

Mutual fund 15 x 15 x 15 rule

Pankaj Mathpal said that if parents start saving for their child’s education immediately after the child is born, then they could save for about 15 years. Reminding investors of the 15 x 15 x 15 rule of mutual funds, Pankaj Mathpal said, “According to the 15 x 15x 15 rule of mutual funds, an investor can expect to earn a return of 15% on its monthly SIP, if the duration of the investment is 15 years.”

So, assuming a 10% inflation rate, the mutual fund calculator suggests that today 20 lakh required for higher education would reach approximately 85 million. Thus, the investment objective of investors who start investing in their child’s higher education immediately after the child’s birth would be 85 million.

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Source: SBI UCITS Calculator

According to SIP Mutual Fund Calculator, monthly investment required to get 85 lakh at maturity after investing for 15 years assuming an annual return of 15% would be approximately 12,500.

Source: SBI UCITS Calculator

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Source: SBI UCITS Calculator

However, Optima Money’s Pankaj Mathpal said to use an annual increase instead of starting with a higher monthly SIP amount. He said that the annual increase helps an investor to keep the monthly SIP as low as possible at the time of the start of the investment. He said to use a normal 10% annual increase and bring his monthly SIP amount down to lower levels.

So, assuming an annual increase of 10% and an annual return of 15% after 15 years, an investor would start a SIP with 8,500 per month.

Source: Piggy SIP Calculator

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Source: Piggy SIP Calculator

Regarding equity mutual funds that can return 15% to an investor, FinMapp’s Pramod Chandrayan said, “Reliance Large Cap, ICICI Prudential Bluechip Equity Fund, Tata Equity P/E Fund, HDFC Small Cap Fund and DSP Tax Saver Fund are some of the best equity funds an investor can consider investing in while planning for their child’s college education.”

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