This is a real case study of one of my clients when we first met in 2013. I received his call last week and he was quite happy of achieving his gaols. So, thought of penning down my ideas. The names here have been changed to protect ones identity.
Ravi: Mohan, I’m really worried about how I’ll manage to fund my 2-year-old son’s education. With so many financial products in the market, I feel lost. Can you guide me?
Mohan: Of course, Ravi. It’s natural to feel overwhelmed with so many options out there. Let’s simplify this. First, let’s estimate the future cost of your child’s education based on some basic calculations. What kind of career do you envision for him?
Ravi: Well, I’d like to keep options open, but let’s assume he wants to pursue MBBS.
Mohan: Good choice. The current cost for an MBBS program, including the internship, is around ₹30 lakhs for 4.5 years. If he plans to do an MD afterward, that might cost around ₹45 lakhs in today’s terms. These numbers are ballpark figures, of course, but we can use them to plan better.
Ravi: ₹30 lakhs for MBBS and ₹45 lakhs for MD? That’s ₹75 lakhs already. How much will it cost by the time he’s ready?
Mohan: Considering an 8% annual inflation rate, the costs will be much higher in the future. By 2034, when he might pursue his MD, we estimate the total cost of MBBS to rise to about ₹1.027 crores and MD to around ₹2.26 crores.
Ravi: Wow! That’s ₹3.28 crores! How will I save that kind of money?
Mohan: Don’t worry; with the right plan, it’s achievable. To meet these goals, you’ll need to invest systematically. To fund the MBBS cost of ₹1.027 crores by 2029, you’ll need to invest around ₹19,767 per month. For MD, you’d need to invest ₹23,151 per month to accumulate ₹2.26 crores by 2034. Together, this would require a monthly SIP of ₹42,918.
Ravi: That’s quite a big commitment. What if I start and lose motivation along the way?
Mohan: That’s where discipline and the power of compounding come in. Let me share an example of another client I worked with in 2013. He had similar concerns, and I suggested a mix of four funds for his goals.
Ravi: What happened with him?
Mohan: He started investing the following amounts:
- ₹6,500 in a Small Cap Fund
- ₹11,000 in a Tax Saver Fund
- ₹13,000 in a Large & Mid Cap Fund
- ₹12,500 in a Flexicap Fund
Together, his monthly investment was ₹42,918, just like yours would be.
Ravi: And how did it go?
Mohan: Amazingly well. Today, those investments have grown significantly:
- Small Cap Fund: ₹39.95 lakhs
- Tax Saver Fund: ₹44.79 lakhs
- Large & Mid Cap Fund: ₹65.98 lakhs
- Flexicap Fund: ₹55.88 lakhs
In total, he has already accumulated ₹2.06 crores, and he still has 5 years left to meet the MBBS goal and 10 years for MD. He’s comfortably on track to achieve both.
Ravi: That’s incredible. So the key is to stay invested long-term and stick to the plan?
Mohan: Exactly, Ravi. The simpler and more consistent your investments, the better your chances of success. Make your investments as “boring” as possible—no constant tinkering or chasing trends. Let time and discipline do their magic.
Ravi: This sounds reassuring. Let’s create a plan for my son’s education.
Mohan: Great decision! Let’s get started and ensure your son’s dreams are well-supported financially.
Simplified Money Talks 