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June 17, 2000
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Earlier: • Planning for your child's education
Rohit Sarin now tackles the final goal in this series.
We will restrict this analysis within the following parameters:
- Individual will be 55 years of age when the child is to be married
- Balanced risk appetite
- Estimated current cost of the marriage stands at Rs 1 million
- No existing savings specifically for the marriage
- A 12 per cent per annum return on debt funds
- A 20 per cent per annum return on equity funds
- Inflation at the rate of 8 per cent
CASE IRecommendations in the case of the 25 year-old....................
- A recommended debt to equity ratio of 40:60. For this, a mix of debt and equity based funds should be selected.
- Estimated current cost of marriage of Rs 1 million would inflate to a Rs 100,62,657 after 30 years.
- Assuming that this would not be part financed by a loan, an amount of Rs 100,62,657 would have to be saved over a period of 30 years.
- With a debt to equity mix of 40:60, the person needs to begin with a total monthly investment of Rs 843. This monthly saving/contribution would keep on increasing every year.
In figures, the complete 30-year plan translates to..............
| Year |
Equity Fund |
Debt Fund |
Total |
Yearly |
Income |
Cumm. Balance |
| 2000 |
1 |
506 |
337 |
843 |
10,119 |
786 |
10,904 |
| 2001 |
2 |
557 |
371 |
928 |
11,131 |
2,461 |
24,496 |
| 2002 |
3 |
612 |
408 |
1,020 |
12,244 |
4,537 |
41,276 |
| 2003 |
4 |
673 |
449 |
1,122 |
13,468 |
7,089 |
61,832 |
| 2004 |
5 |
741 |
494 |
1,235 |
14,815 |
10,203 |
86,850 |
| 2005 |
6 |
815 |
543 |
1,358 |
16,296 |
13,980 |
117,126 |
| 2006 |
7 |
896 |
598 |
1,494 |
17,926 |
18,539 |
153,591 |
| 2007 |
8 |
986 |
657 |
1,643 |
19,716 |
24,017 |
197,324 |
| 2008 |
9 |
1,085 |
723 |
1,808 |
21,696 |
30,573 |
249,593 |
| 2009 |
10 |
1,193 |
795 |
1,988 |
23,856 |
38,393 |
311,841 |
| 2010 |
11 |
1,312 |
875 |
2,187 |
26,244 |
47,691 |
385,777 |
| 2011 |
12 |
1,444 |
962 |
2,406 |
28,872 |
58,719 |
473,368 |
| 2012 | 13 |
1,588 |
1,058 |
2,646 |
31,752 |
71,766 |
576,887 |
| 2013 |
14 |
1,747 |
1,164 |
2,911 |
34,932 |
87,169 |
698,987 |
| 2014 |
15 |
1,921 |
1,281 |
3,202 |
38,424 |
105,315 |
842,726 |
| 2015 |
16 |
2,113 |
1,409 |
3,522 |
42,264 |
126,657 |
1,011,647 |
| 2016 |
17 |
2,325 |
1,550 |
3,875 |
46,500 |
151,716 |
1,209,863 |
| 2017 |
18 |
2,557 |
1,705 |
4,262 |
51,144 |
181,095 |
1,442,102 |
| 2018 |
19 |
2,813 |
1,875 |
4,688 |
56,256 |
215,492 |
1,713,849 |
| 2019 |
20 |
3,094 |
2,063 |
5,157 |
61,884 |
255,713 |
2,031,446 |
| 2020 |
21 |
3,404 |
2,269 |
5,673 |
68,076 |
302,689 |
2,402,211 |
| 2021 |
22 |
3,744 |
2,496 |
6,240 |
74,880 |
357,498 |
2,834,589 |
| 2022 |
23 |
4,118 |
2,746 |
6,864 |
82,368 |
421,379 |
3,338,337 |
| 2023 |
24 |
4,530 |
3,020 |
7,550 |
90,600 |
495,767 |
3,924,704 |
| 2024 |
25 |
4,984 |
3,322 |
8,306 |
99,672 |
582,316 |
4,606,691 |
| 2025 |
26 |
5,482 |
3,654 |
9,136 |
109,632 |
682,932 |
5,399,255 |
| 2026 |
27 |
6,030 |
4,020 |
10,050 |
120,600 |
799,815 |
6,319,670 |
| 2027 |
28 |
6,633 |
4,422 |
11,055 |
132,660 |
935,500 |
7,387,831 |
| 2028 |
29 |
7,296 |
4,864 |
12,160 |
145,920 |
1,092,908 |
8,626,659 |
| 2029 |
30 |
8,026 |
5,350 |
13,376 |
160,512 |
1,275,406 |
10,062,577 |
CASE IIRecommendations in the case of the 30 year-old....................
- Recommended debt to equity ratio of 50:50. For this, a mix of debt and equity based funds should be selected.
- Estimated current cost of higher education of Rs 1 million would inflate to Rs 68,48,475 after 25 years.
- Since it is assumed that this would not be part financed by a loan, an amount of Rs 68,48,475 would need to be saved over a period of 25 years.
- With a debt to equity mix of 50:50, the person needs to begin with a total monthly investment of Rs 1,360. This monthly saving/contribution would keep on increasing every year.
In figures, the complete 25-year plan translates to............
| Year |
Equity Fund |
Debt Fund |
Total |
Yearly |
Income |
Cumm. Balance** |
| 2000 |
1 |
680 |
680 |
1,360 |
16,317 |
1,213 |
17,530 |
| 2001 |
2 |
748 |
748 |
1,496 |
17,949 |
3,788 |
39,266 |
| 2002 |
3 |
823 |
823 |
1,645 |
19,744 |
6,965 |
65,974 |
| 2003 |
4 |
905 |
905 |
1,810 |
21,718 |
10,850 |
98,543 |
| 2004 |
5 |
995 |
995 |
1,991 |
23,890 |
15,571 |
138,004 |
| 2005 |
6 |
1,095 |
1,095 |
2,190 |
26,279 |
21,273 |
185,556 |
|
2006 |
7 |
1,204 |
1,204 |
2,409 |
28,907 |
28,126 |
242,589 |
|
2007 |
8 |
1,325 |
1,325 |
2,650 |
31,800 |
36,326 |
310,714 |
| 2008 |
9 |
1,458 |
1,458 |
2,915 |
34,980 |
46,100 |
391,794 |
| 2009 |
10 |
1,603 |
1,603 |
3,206 |
38,472 |
57,710 |
487,976 |
| 2010 |
11 |
1,764 |
1,764 |
3,527 |
42,324 |
71,462 |
601,762 |
| 2011 |
12 |
1,940 |
1,940 |
3,880 |
46,560 |
87,707 |
736,029 |
| 2012 |
13 |
2,134 |
2,134 |
4,267 |
51,204 |
106,849 |
894,082 |
| 2013 |
14 |
2,347 |
2,347 |
4,694 |
56,328 |
129,358 |
1,079,768 |
| 2014 |
15 |
2,582 |
2,582 |
5,164 |
61,968 |
155,773 |
1,297,509 |
| 2015 |
16 |
2,840 |
2,840 |
5,680 |
68,160 |
186,717 |
1,552,385 |
| 2016 |
17 |
3,124 |
3,124 |
6,248 |
74,976 |
222,906 |
1,850,267 |
| 2017 |
18 |
3,437 |
3,437 |
6,873 |
82,476 |
265,167 |
2,197,910 |
| 2018 |
19 |
3,780 |
3,780 |
7,560 |
90,720 |
314,449 |
2,603,079 |
| 2019 |
20 |
4,158 |
4,158 |
8,316 |
99,792 |
371,847 |
3,074,718 |
| 2020 |
21 |
4,574 |
4,574 |
9,148 |
109,776 |
438,619 |
3,623,113 |
| 2021 |
22 |
5,031 |
5,031 |
10,062 |
120,744 |
516,209 |
4,260,066 |
| 2022 |
23 |
5,535 |
5,535 |
11,069 |
132,828 |
606,280 |
4,999,174 |
| 2023 |
24 |
6,088 |
6,088 |
12,176 |
146,112 |
710,743 |
5,856,029 |
| 2024 |
25 |
6,697 |
6,697 |
13,393 |
160,716 |
831,788 |
6,848,533 |
CASE IIIRecommendations in the case of the 35-year old....................
- Recommended debt to equity ratio of 50:50. For this, a mix of debt and equity based funds should be selected.
- Estimated current value of education of Rs 1 million would inflate to Rs 46,60,957 after 20 years.
- Since it is assumed that this would not be part financed by a loan an amount of Rs 46,60,957 would need to be saved over a period of 20 years.
- With a debt to equity mix of 50:50 the person needs to begin with a total monthly investment of Rs 2,061. This monthly saving/contribution would keep on increasing every year.
In figures, the complete 20-year plan translates to..............
| Year |
Equity Fund |
Debt Fund |
Total |
Yearly |
Income |
Cumm. Balance |
| 2000 |
1 |
1,031 |
1,031 |
2,061 |
24,735 |
1,838 |
26,573 |
| 2001 |
2 |
1,134 |
1,134 |
2,267 |
27,209 |
5,742 |
59,524 |
| 2002 |
3 |
1,247 |
1,247 |
2,494 |
29,930 |
10,558 |
100,011 |
| 2003 |
4 |
1,372 |
1,372 |
2,744 |
32,922 |
16,448 |
149,382 |
| 2004 |
5 |
1,509 |
1,509 |
3,018 |
36,215 |
23,605 |
209,202 |
| 2005 |
6 |
1,660 |
1,660 |
3,320 |
39,836 |
32,249 |
281,287 |
| 2006 |
7 |
1,826 |
1,826 |
3,652 |
43,820 |
42,637 |
367,743 |
| 2007 |
8 |
2,009 |
2,009 |
4,017 |
48,204 |
55,066 |
471,013 |
| 2008 |
9 |
2,209 |
2,209 |
4,418 |
53,016 |
69,882 |
593,911 |
| 2009 |
10 |
2,430 |
2,430 |
4,860 |
58,320 |
87,482 |
739,713 |
| 2010 |
11 |
2,673 |
2,673 |
5,346 |
64,152 |
108,327 |
912,192 |
| 2011 |
12 |
2,941 |
2,941 |
5,881 |
70,572 |
132,951 |
1,115,715 |
| 2012 |
13 |
3,235 |
3,235 |
6,469 |
77,628 |
161,969 |
1,355,313 |
| 2013 |
14 |
3,558 |
3,558 |
7,116 |
85,392 |
196,090 |
1,636,794 |
| 2014 |
15 |
3,914 |
3,914 |
7,828 |
93,936 |
236,132 |
1,966,862 |
| 2015 |
16 |
4,305 |
4,305 |
8,610 |
103,320 |
283,039 |
2,353,221 |
| 2016 |
17 |
4,736 |
4,736 |
9,471 |
113,652 |
337,897 |
2,804,771 |
| 2017 |
18 |
5,210 |
5,210 |
10,419 |
125,028 |
401,959 |
3,331,758 |
| 2018 |
19 |
5,730 |
5,730 |
11,460 |
137,520 |
476,666 |
3,945,944 |
| 2019 |
20 |
6,303 |
6,303 |
12,606 |
151,272 |
563,674 |
4,660,890 |
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