My daughter is a year old now and I want to build an education corpus for her which I will need 12-14 years from now. What’s the best way to create this corpus and how much should it be?
The sum that you invest today should beat inflation and grow at a pace faster than inflation
My daughter is a year old now and I want to build an education corpus for her which I will need 12-14 years from now. What’s the best way to create this corpus and how much should it be?
Rekha Sharma, Bhopal
It is a good idea to start saving and investing for your daughter’s education 12-14 years hence. A few things that you should keep in mind at the time of start – the cost of education today, price rise and the sum that you can start investing from now. All these may seem as making too many assumptions, however, it is all necessary to make a start and have the funds when you actually need it.
What you need to keep in mind is that the sum that you invest today should beat inflation and grow at a pace faster than inflation to build a desired education corpus for your daughter when it is needed. You appear to be a first time investor and we suggest you make a start with Rs 3,000 to Rs 5,000 in a balanced fund from the OLM Elite Beginner portfolio. These are funds that mix equity and debt in a pre-defined range, which is maintained by the fund manager at all times. Experience how investing in mutual funds work for a year before you can identify yourself under other investor types and consider investing in other funds.
You could also work on a sum that you will need 12-14 years later and plan to invest towards that goal accordingly. For instance, if the cost of pursuing medicine today is Rs 20 lakh, at 10 per cent inflation, 15 years later the same will cost Rs 84 lakh. So, you can understand the need to start saving early towards this goal. Remember, unlike other financial goals like buying a house or going on vacation, education as a goal cannot be delayed. There is no room to postpone the year when your daughter will enter college. So, unlike other financial goals that are flexible, this one is not and you should evaluate the progress made by you. For instance, to build a corpus of Rs 84 lakh, you should be investing Rs 17,900 a month in a fund that earns 12 per cent returns.