HaatBeatBeyond the numbers
The maths shows one side. These are the things only you can weigh.
- Goals changeA child may choose a different path, or a dream home may move cities. Review the plan as life unfolds.
- One goal among manyRetirement, an emergency fund and other goals compete for the same money. Balance them rather than funding one at any cost.
- Protect the planLife and health cover make sure the goal can still be met if something happens to the earner.
- Talking about itSharing the plan with the family, and with children when they are older, makes the goal feel real and the choices easier.
- Celebrate progressBig goals take years. Marking milestones keeps saving from feeling like a sacrifice.
How it's calculated
The monthly SIP uses the same method as the SIP page's "Reach a goal" tab: investments at the start of each month, compounding monthly at the yearly return divided by 12, with an optional yearly increase.
Assumptions
- The goal's cost rises by a steady yearly rate; education often rises faster than general prices.
- A steady investment return; real returns vary from year to year.
- Taxes, charges and the timing of fees within the final year are not included.
Worked example
An education costing 20 lakh rupees today, needed in 12 years, with costs rising 8% a year, would cost about 50.36 lakh rupees then. At an assumed 11% return that needs about 16,813 rupees a month, or about 13.53 lakh rupees once today; starting at about 10,667 rupees and raising it by 10% each year also gets there.
Questions
What rise should I use for education?
Education costs have often risen faster than general inflation. Use a cautious figure, and revisit it every year or two.
Why plan in today's money?
Because today's prices are easy to look up. The planner then raises them to the year you need the money.
What if I already have some savings?
Enter them: they grow at the same return, and only the rest of the goal needs new saving.
Should I keep investing in the market right up to the goal?
Many people move money into safer options in the last few years before a fixed date, so a market fall does not hit at the worst time.