In the words of Oprah Winfrey, “Education is the key to unlocking the world, a passport to freedom.” Unfortunately, quality education is not free, at least for now. One has to pay a hefty amount to get a good education. To get a quality education for the child, parents leave no stone unturned and put everything at stake. Parents, usually take loans for the higher education of their children.
This burden of education loan often falls on the shoulder of the child as soon as he/she finishes college. This problem can be easily avoided and one can save a huge sum of money with little future planning. In this article, we will show you, how can you create a corpus for your child’s higher education.
Let’s understand the maths of loans:
Before going into the planning part, it is important to understand, how much an education loan costs. Let’s take an example in which your child’s education demands Rs.30 lakhs. In such a situation, if at that time a loan of Rs 30 lakhs is be available for 7 years even at as low as 10% interest, then too you will have to pay a very huge sum of money. For a loan Rs 30 lakhs you will pay a monthly installment of Rs 49,804. In 7 years you would have paid Rs 11,83,498 only as interest. To total amount you pay for a loan of Rs. 30 lakhs will be Rs 41,83,498.
How to create a fund on your own?
Also read: How Can You Get A Collateral-free Education Loan?
If your have new born, then you have about 18 years, Let us know how to do financial planning so that you have a fund of Rs 30 to 40 lakhs ready for the higher education of the child.
For this, the schemes that give the best returns of mutual funds can be selected. The list of these good mutual funds will be given further here.
For the past many years, it is being evident that mutual funds are giving very promising returns. Although many mutual fund schemes give returns of more than 15 percent, one should expect returns between 10 to 15 percent.
- If the CAGR of any good mutual fund is more than or equal to 15 percent, then you can start SIP with Rs 4000 to 5000. Continue this investment every month for 18 years. At maturity, you’ll get more than 40 lakhs with an investment of only Rs 8.64 lakh.
- If the CAGR of the selected mutual fund is more than or equal to 12 percent and you invest Rs. 4000 every month for 18 years, you’ll get a fund of Rs. 30 lakhs against your investment of Rs. 8.64 lakhs.
- If your mutual fund scheme provides your return at the rate of 10 percent, then you must put Rs. 5000 every month for 18 years to get a fund of Rs. 30 lakhs. After 18 years you’ll get a fund of Rs. 30,27,840 against an investment of Rs. 10,80,000.