Education planning calculators – A useful tool for goal-based investing

Goal Based Calculator - Quantum Mutual Fund

Education costs have risen sharply in India over the last two decades. Planning early for your child’s higher education is critical today. Education planning calculators are online tools that can help you estimate the required corpus and plan investments systematically.

What is an education planning calculator?

An education planning calculator is designed to help parents calculate the amount required to fund their child’s higher education based on inputs like:

– Child’s current age

– Number of years until college 

– Expected tuition fees

– Annual cost inflation

– Desired corpus funding percentage 

– Expected annual returns on investments

By taking these variables into account, the calculator estimates the monthly or annual investment needed to build the target corpus by the time the child is ready for college.

Some calculators also suggest optimal investment products and asset allocation to achieve the goals. The output helps parents develop a financial plan for funding their child’s future education needs. 

Key benefits of using an education planning calculator  

Education planning calculators offer the following benefits for goal-based investing:

– Estimate future costs more accurately based on current fees, inflation, and the years left for accumulation. This results in a more realistic target corpus.

– Factor in expected returns across asset classes to arrive at the periodic investments required to achieve the target corpus. 

– Helps avoid underfunding the goal by accounting for the time value of money through compounding effects.

– Allow simulation of various scenarios by changing parameters like inflation, returns, time horizon etc.

– Suggest the right investment products and asset allocation to align with the goal. Equity funds help beat inflation for long-term goals. 

– Provide an optimized investment plan to achieve the required corpus through periodic investments. 

– Help parents become more disciplined and methodical savers by committing to the investment plan.

How to use an education planning calculator effectively?

Follow these steps to utilise an education planning calculator effectively:

1. Determine current annual costs – Research costs for target colleges based on current fees. 

2. Estimate cost inflation – Education inflation historically ranges from 10-12% in India. Conserve estimates.

3. Define time horizon – Calculate years left until college based on child’s age.

4. Specify corpus funding percentage – Decide the portion of costs you aim to fund. 

5. Expect reasonable returns – Use conservative return estimates for each asset class. 

6. Optimize parameters – Simulate various scenarios and optimize inputs.

7. Commit to the investment plan – Systematically invest the recommended amount.

8. Review and revise periodically – Reassess the plan every 2-3 years based on updated parameters.

Things to remember –

When using an education planning calculator to invest in mutual funds, remember to:

– Avoid over-optimistic assumptions for returns or inflation to set realistic targets. 

– Invest surplus savings to increase the likelihood of achieving the target corpus.

– Include both tuition and living expenses in cost estimates.

– Consider education inflation carefully, it has historically exceeded general inflation. 

– Allocate a higher portion to equity funds to beat inflation over the long term.

Used prudently, education planning calculators are a invaluable tool for determining target corpus, optimizing asset allocation and developing a goal-based investment plan. Stay disciplined and review the plan periodically for successful outcomes.
Visit to know more.

Maria J. Danford

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