Q. We have two children; one is in grade 3 and the other in grade 5. Our annual income is ₹1 crore. We want our children to attend college in the US. We have estimated an expense of ₹4 crores each. We are currently investing ₹50,000 monthly through SIP but we have idle funds in our bank account. How much more should we invest and where?
Investing in your children’s education through a systematic investment plan (SIP) is a smart financial decision.
You need to accumulate a total of ₹4 crores each for your children's college education in the US. Let us assume you have no other major financial goals. Your children will be ready to go to college in another 7 to 9 years. Let us see the calculations below:
| Particulars | Child in grade 5 | Child in grade 3 |
| Years for Goal | 7 years | 9 years |
| Amount required (in today's value) | 4,00,00,000 | 4,00,00,000 |
| Education Inflation | 10% | 10% |
| Future value of Goal | 7,79,48,684 | 9,43,17,908 |
| Assumed Returns from portfolio | 10% | 10% |
| Monthly Investment required | 6,39,142 | 5,37,411 |
So according to the analysis above you will need to invest about Rs. 11.76 Lakhs monthly to achieve the goal fully. However, looking at your current income levels it will not be possible to invest such an amount on a monthly basis and therefore, we recommend you to take a loan of about 50% for both your kid’s college expenses and fund 50% with your investments.
To invest the amount on a monthly basis consider the mix of equity and debt according to your risk profile. Given your long-term goal and the need to accumulate a large corpus, a high allocation to equity funds would be suitable.
Periodically review and rebalance your portfolio to ensure that your investments remain aligned with your goals, your risk profile, and market conditions.
To make the most of idle funds in the bank, consider investing in a liquid fund or a short-term debt fund if it is for any short-term goals, which would provide higher returns than a regular savings account. Or else, divert them into equity-oriented funds as per your risk profile.
It is recommended that you consult a financial advisor to create a customised investment plan based on your specific needs and goals.
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