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In today's fast-paced world, good higher education is an important factor in securing your child's future. Providing the best education to their children is a top priority for every parent. You should plan for your child’s higher education from a relatively early stage to ensure that your children’s career aspirations are fulfilled.
What is Child Education Planner?
The Child education plan calculator will show you the indicative amount you need to save to ensure your child’s aspirations are fulfilled. You can input your child’s higher education cost, when your child begins higher education and expected returns on investment. The calculator will tell you how much you need to save and invest on a monthly basis in order to achieve your child’s higher education aspirations.
Why should one use a Child Education Planner?
Cost of higher education in India has been increasing at a rate faster rate than the average CPI inflation rate. If the current cost of the higher education, you aspire for your child is Rs 20 lakhs, in 10 years the cost will be more than Rs 50 lakhs (assuming 10% inflation).
You start saving and investing for your child’s higher education from a young age, so that you have sufficient time for your investments to generate returns needed to accumulate the required corpus for your child’s higher education goals.
By saving and investing regularly (e.g. monthly) you will remain disciplined in your investments for your child’s higher education. Since you will be investing regularly you can benefit from Rupee Cost Averaging and not be influenced by market movements.
The planner will also keep you realistic in your expectations. For example, if you are planning a foreign education for child, but are unable to save the amount necessary to fund a foreign education, then you should either revise your expectations or make sacrifices in your discretionary expenses to achieve the aspiration you have your child.
What are the advantages of Child Education Planner?
Many young parents have less idea of how much higher education costs, especially if they aspire for their child to get the education they themselves did not get e.g. professional education, post graduate or doctoral degrees, foreign education etc.
When you are estimating higher education costs for your child, you will research different education options and what they cost. As such you can be a much more informed parent with regards to your child’s higher education. You may also be able to guide your child appropriately taking their merit and interests into consideration.
Once you know how much to save and invest for your child’s education, you can setup a dedicated fund for your children’s higher education. Since you have an emotional attachment to your child’s education and career, you will remain disciplined in your investments.
Many parents often take loans or dip in to their retirement savings to fund their child’s higher education. Both can be detrimental to your long term financial interests. By using our Child Education Planner and setting up a dedicated fund, you can avoid dipping into investments earmarked for equally important life-stage goals like retirement planning etc.
How to Use the DSP Child Education Plan Calculator?
Utilising the DSP Child Education Plan Calculator is a straightforward process. First, you need to access the calculator, which is available here – Click here. follow these steps:
1. Enter cost of the education as of today.
2. Mention the year when you need the money
3. Then, enter the expected rate of return. It is best to use the long-term returns of the asset class where you plan to invest.
Once you click on calculate, the calculator will give an output of the monthly amount you will need to save. It will also show you a graph of the amount you will have to save and the portfolio value through the journey.
There is an additional option of doing ‘advanced options’. This segment gives you the option to enter the following additional data.
4. Amount that you can invest now: This can be the lump sum that you can add to the investment today.
5. Expected inflation rate: The fees and the cost of education also rise over time. Entering an expected value helps create a more realistic scenario of how much investment is required.
Once you've entered these details, the calculator will reassess and show you the amount you must save on a monthly basis to reach your goal of building the corpus for your child's education expenses.
What should one keep in mind while using the Child’s Education Planner?
What should be "Current Cost of Education": The "current cost of education" should reflect the current expenses associated with your child's chosen education, taking into account tuition fees, accommodation, books, and other related costs. The cost will depend on the kind of education your child wants to pursue. Cost of professional education e.g. engineering, medical, management etc will be significantly higher than general stream. If your child goes to a college / university in a different city, you have to factor in living expense; living expenses including food, lodging, transportation etc will be different from city to city. If you want foreign education for your child the cost will be several times higher than what it costs in India. You can consult a higher education advisor / consultant if you want to know how much your child’s education will cost.
What should be the "Expected Rate of Return": The "expected rate of return" will depend on where you invest for your child’s higher education. Different investments have different risk profiles; risk and return are interrelated. You should invest based on your investment tenure and risk appetite. For example, if you start saving for your child’s higher education when he / she is 7 – 8 years old, you will have around 10 years of investment tenure. Over long investment tenures equity funds can be suitable investment options. If your investment tenure is 3 to 5 years, you may want to invest in hybrid funds. If your investment tenure is even shorter, then debt fund will be suitable for you. You should consult with your financial advisor if you need help in making investment decisions. You can refer to long term returns of different asset classes / sub-categories to form your return expectations. It is important to refer to long term asset class returns because short term returns can be misleading.
What should be the "Rate of Inflation": It's crucial to consider inflation when planning for your child's education because it can significantly impact the amount you need to accumulate. The inflation rate you enter should be based on historical inflation trends and future expectations. According to historical data (last 10 years or so), higher education cost inflation has been in double digits. You should consult with your financial advisor if you need guidance.
Amount that you can invest now: If you have spare funds that you can invest for your child’s higher education right now then use the advanced option. It will reduce your monthly savings requirement. It is wise to use spare funds for your long term financial goals, provided you have set aside a contingency fund to meet any exigency. Spare funds often get consumed in wasteful expenditure. If you invest them wisely for your long term financial goals, then you can wealth creations benefits through compounding.
Disclaimer
This tool has been designed for information purposes only. Investor should not consider above as a recommendation for any schemes of DSP Mutual Fund / third party mutual fund schemes. Data captured here is publicly available including information developed in-house. The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice. Investors are requested to note that there is no assurance of any returns/capital protection/capital guarantee to the investors in any schemes of DSP Mutual Fund. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. The Performance may vary from scheme to scheme and depends upon several factors including load structure, investment framework, AUM, Investment objective, sector diversion, asset allocation & internal risk management parameter. Investor before investing into any kind of mutual fund scheme should read and be aware of scheme specific risk factors including Risk-o-meter of scheme / benchmark, Investment strategy & objective, asset allocation, Load structure, Plan/options available etc. defined in offer documents (Scheme Information Document and Key Information Memorandum) which are available on website. While utmost care has been exercised while preparing this tool, the DSP Asset Managers Private Limited/ DSP mutual Fund nor any person connected does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information.
"All the returns shown are as per the category prescribed in latest AMFI Best practice Guidelines (AMFI BPG) and any such guidelines issued by AMFI from time to time. Category wise calculators used above is to provide conceptual clarity to investors or for educational purposes. Numerical illustrations are being used for SIP / SWP / STP calculators only for the categories to explain the power of compounding. “Past performance may or may not be sustained in future and is not a guarantee of any future returns”. These figures pertain to performance of the categories/situations as prescribed by AMFI by using the compounded annualized growth rate % (CAGR) prescribed against each category/situation and do not in any manner indicate the returns/performance of any of the schemes of the DSP Mutual Fund. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to any of the units of the schemes of the DSP Mutual Fund. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Note: Returns calculated by taking mean of 10-year rolling returns between 01/06/13 and 30/05/23 for various benchmarks. Mean returns are as follows: INR Gold 9.34%; Sensex: 12.64%; Nifty 50: 12.93% and 10-year G-Sec: 7.20%. (This note is as per AMFI BP)"
DSP Mutual Fund is the leading mutual fund investment company in India.
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