How to save and invest money for your Child’s Education? – Ready 5 easy steps.

POSTED BY Jagoinvestor ON January 11, 2010 COMMENTS (233)

Child Education is one of the biggest goals of parents these days because of the tough environment and high expenses involved.

Most of the parents start saving for Child Education right from the birth of Child, which is a great! In this post we learn how you should evaluate the target cost of Children Education and how you can achieve the targets within expected deadline. We are mainly talking about Higher education in this article.

Many Companies come up with Child plans and other products which are nothing more than ULIP’s bundled with special features like Wavier of Premium option and some other features. However Planning for Child Education is not a big task and you can do it yourself, given you have some interest and eagerness to do it.

So following are the 5 steps you can do yourself to plan for your Child Education:


Step 1: Set a Target Date

The first step is to find out the target date for the child education goal. I feel the that average age when a child goes for Higher education can be taken as 21 or 22. You can take your own target tenure depending on your expectations and situation.

If you are not yet married then find out the estimated time left for your marriage and when you want to start your family (i mean children) and add target years to that number. For me personally it would be 4 + 21 = 25 yrs. what about you?

Step 2: Set a target amount in today’s term

The next step is to determine how much does it cost in today’s value for giving education to your child.  All of us have different aspirations when it comes to our child education, courses like  MBA, Engineering, MBBS, Software related courses are on our minds.

So let’s say for example you determine that Rs 10 lacs is good enough to provide a good education to your child in today’s value. Now you can jump to next step, but before that make sure you understand the effect of inflation on our Money. Here is another good article on Inflation

Step 3: Find out the amount you need on target date

Next step is to find out how much amount you actually need in the end. For this you first need to determine the rise in education cost per year. As per the recent year numbers, Education costs are increasing at 10% per annum.

A decade ago you could have done an MBA at 1.25 or 1.5 lacs, but today it costs more than 4 lacs. That’s more than the average inflation. Education cost in our country has been increasing at higher speed than other things. so you need to consider some figure. I would like to take this as 10%.

Now, you can just inflate the today’s cost using simple compound interest formula. Understand Compound Interest and other important Formulas.

Target Amount = Amount today X (1 + rate) ^ Tenure

Example: Considering myself, the amount I would require today is around 8 lacs. My tenure is 25 yrs and rise in education cost I would like to take as 10%. So

Target Amount I need after 25 yrs = 8,00,000 X ( 1 + .10) ^25 = 86 lacs (approx)

So, I can see that I need to make around 86 lacs in 25 yrs. Please note that this figure is based on your assumptions. The actual Figure you might need may be more or less to this amount. But still this is good enough, as we have a plan at least and we are near the goal.

Step 4: Estimated the return which you can generate over your investments

This is an important step where each investor has a different level of risk appetite and knowledge. Depending on those factors one can choose different products for investments and can generate some return through it.

One who is not much interested in finances and has lesser risk appetite can choose Balanced Funds or Debt Funds and can generate around 10-11% returns. On the other hand a person who can take more risk and have more interest in finances can invest in products like Equity Mutual funds, ETF’s, Direct Equities etc and can target close to 14-15% returns.

Getting more or less return is fine. All it matters is, does it suit your risk appetite

There is no point in investing in risky products if you are not a risk taker. As a rule of thumb, a person who is investing for long-term like 10+ yrs should take Equity route because over that kind of time frame Equity has performed the best with maximum returns and with small risk.

So for long-term, Equity is what you should invest in and for short-term prefer equity only if you are great risk taker. Your range of return expectation should be from 8% – 15%. Anything above that is a bonus but getting more than 15% is tough for general investors like us.

Anything like 20-25% should be the target of more professional investors who have advanced knowledge and who are full-time into stock market and related fields. So better be satisfied with suitable returns which will be able to achieve your goals.

Understand Equity and Debt here

Step 5: Calculate per month contribution

The next step is to find out what is the monthly contribution you need to do. For this you have to use this scary formula.

C = [FV * r] / [(1+r) * { (1+r) ^ t – 1 }]


  • C = contribution per month
  • r =Rate of return you expect to generate on your returns .
  • t = tenure (It would be multiplied by 12 if payments are monthly)
  • FV = Future value of your goal (this is calculated in step 3 .

You can Use this Calculator to calculate these figures. Just fill in your details and get the output. Now you can invest this money in product you have chosen.

Important Points to Remember

  • Apart from these 5 points, there are other points you have to consider which will make your Child Education planning more strong and successful.
  • Make sure you are Insured Properly  because in between if you die prematurely the amount of insurance your dependents get should be good enough to achieve your Child Education. Make sure you buy a good term insurance plan to cover this risk.
  • When you are near the end of the goal, when still 4-5 yrs are left then you should better start withdrawing your money from riskier products to more safer products, so that you do not get surprise drop in your Corpus. If another subprime crisis happens at the same time when your kid is ready to go to college, it will be a tough situation. So better start withdrawing your money every month from Riskier products to safer products.
  • Make sure you review the performance of your Child Education plan every year and make sure that things are going as expected. If not, find out why? See if you need to change your numbers, if you do it’s fine. No one can plan for things in advance with accuracy and it’s totally find if things go little off track. Just be ready to adopt the changes.
  • At the end, sticking to this plan is the deciding factor of whether you are successful or not. The consistency in Investing for this goal is the main thing. Returns will follow when you follow the plan.
  • Make sure the Asset Allocation is right and make sure you stick to same asset Allocation.
  • Make sure you do not force your Child to adapt as per your Plan. Make sure you don’t have anything rigid for Child. Let him/her decide what they want to do, You are mainly a motivational parent who are paying for cost of what your child wants to do in their life. A successful Child Education plan won’t make any sense if he/she is not able to pursue what they are passionate of and love doing.


You have several products in market which claim to be Child Plans. They are costly and complicated for most of the general investors. The simple funda for successful financial planning is “Dont buy if you dont understand it”. Planning for Child Education can be a step by step designed simple plan which we can do ourselves.

Please leave your Comments to let me know how did you like the article? Which one of these steps is the most challenging part? What do you suggest is the rough estimate of Child Education expenses today?

233 replies on this article “How to save and invest money for your Child’s Education? – Ready 5 easy steps.”

  1. sajid says:

    Hi Manish,

    I have two child, they are just below the age of 2, one is of 1.5 and other one is of 6 months.
    so iam much more concern about their education.
    so please let me know good option for this to secure there future.
    i dont have a knowledge of securities market.
    Please let me know the name of the investment plan or any suggestion in this regards directly.


    1. Hi Sajid

      I would suggest mutual funds for their long term future. You can get in touch with my team who will guide you on everything .

      Just fill up this –


      1. sajid says:

        Thanks for your help.
        I surely go for long Term MF. but is there any other option that best suit my need.
        Please let me know.


  2. Govind says:

    Hi mannish
    I have son who is 8 yrs old. I have taken taken ULIP policy from burla sun life thinking it will generate 15 lakh at 18 yrs time. The premium is 48k started from 2009. I am seeing that my returns are not that great and risk of not achieving the goal. Two queries

    1. What shall I do with existing policy.?
    2. Knowing I have 10 yrs till gets 18 and still wants to get 15-20 lakh what should I do .. Will ppf is good option still? Or need to move to some other options

    I can invest 1.5-2 lakh per annum

    Please suggest

    1. I would rather suggest Equity mutual funds SIP . ULIP are costly products and are not suggested.

      I suggest you take our help in setting up your SIP’s , we will help you with investment and also help you in tracking it

  3. Parth says:

    This article is really helpful. I really like it how you guys have explained it. Recently my mom recommended a website where you could estime the cost of your childs education and how much you need to save for their near future . I really liked it . I know you guys must be thinking that i am trying to promote this website and all but i am just a common guy who likes helping people and giving free advice . Well the website is where there are various calculators and one of them is education calculator. This is the exact link.

    1. Glad to know that Parth ..

  4. samgirl says:

    My daughter is 2 months old. I would like to plan for her education. The amount that I am targeting is some where between 20-25 lacs. which one is the best suitable equity plan to go for it. Would you also let me know how should I go about it

    1. You can look at HDFC mid cap opportunities !

  5. neha chandan says:

    My daughter is one year old. I would like to plan for her education. The amount that I am targeting is some where between 20-25 lacs. which one is the best suitable equity plan to go for it. Would you also let me know how should I go about it

    1. Hi Neha

      Its not a small planning. You should either go for a financial planning exercise or learn a bit about it yourself. I suggest SIP in mutual funds for that. You can also check our service for this –

  6. khushboo says:

    Hi Manish,

    Further to my query if i discontinue the policy i end up losing around 50K.
    I want to build a corpus of around 1c for my son in 15yrs time. but i cannot afford the heavy investments wich i have to do. can you please guide me in reaching near my goal.

    1. IN that case you should continue your payment in same policy

  7. khushboo says:

    Hi Manish,

    Very informative blog. I have a query should we invest in endownment policies. I have a endownment policy in my sons name. he is 4yrs old . i have taken birla vision life for 15yrs. i am just 7 months into the policy. My monthly taken home is 46k and am 40yrs old.
    and am a single parent without any liabilities. recently i have invested in axis bank MF and have some amount in ppf and FD.

    My question is should i continue with the policy for its term or make it paid after 3yrs. I am thinking of buying a flat for invcestment in mumbai. please advice.

    1. There are too many things you have asked here 🙂 . I think you need to first concentrate on the security part like term plan, health insurance etc and then invest for your goals. Have you broken downs your goals in a list ? I suggest get in touch with a good financial planner to help you on overall issue .

  8. manu says:


    Its a very nice article. I want to invest for my son’s higher education. He is 5 now and in my view, he need lump sum by his 18 years when he complete his higher secondary. if we take for eg MBA which costs 8 lakh per annum roughly as per today’s market. I don’t understand how have you calculated the required amount …Target Amount = Amount today X (1 + rate) ^ Tenure ..what is this ^ ?
    and roughly if we take inflation as 10%, I assume it as 30 lakh is needed . Now my question, to achieve this target, should I consider any child investment plan or SIP or MF or ULIP. Can you please advise ? I appreciate it. if its SIP, the return amount is taxable right ? …incase its ULIP / Child plan there is no tax on the withdrawal , correct ? Please advise I am getting confused what to choose and how to start ? I am 35 in IT, planning for his higher education lump sum.

    Thanks again .

    1. If its SIP , then the returns are not taxable . You can do it in FD also , but then it will be taxable .


  9. Aditya says:

    Hi Manish,

    I have a 4 year old son, and for now am investing into two PPF accounts, 1 Lac into each account. And also hold FDs which we intend to keep on renewing for long term ofcrouse. As you can see we have not invested into equity so far and are keen on creating a corpus in the next 15 years. We could stretch for 20k+ per month on a SIP, any suggestions on what MFs to go for, obviously for a long term basis.


    1. There are various mutual funds to choose from .. What kind of fund you need, how much risk you can take ?

      1. Aditya says:

        I’d be a medium-risk taker and was thinking of having a SIP in established equity funds with a long track record. However i see Sensex is touching a high these days, presumably a SIP would buy units at high levels? so should i wait it for a while. What do you say? or invest a lump sum in one of the MFs?

        1. I would say jump in if you are looking at very long term , the more you want to wait , the more time you will loose !

  10. Hiraman Patil says:

    Hi Manish,

    I want to invest for 1 year old daughter.

    Expecting good returns after 15 to 20 years for her higher education.

    I am ready to invest min 2000 – max 3000 per month.

    Can you please suggest me good plan?

    Thanks in advance.

    1. As I must have mentioned in the article itself , for a 15-20 yrs period , I suggest mutual funds, ETF or any equity based product ! . PPF is also a choice !

  11. Jagrut Khairnar says:

    Hi Manish,
    Very informative article, Thanks for that..!!
    My son is just two month old. Considering the cost of education now a days right from Playgroup and then collage and then higher education, feel like we should start planning for each stage of child’s education and not only of 15 or 18 years later of education.
    One thing I’m still confuse after reading the article is though the SIP and debt investment are good options for securing child education, why not various education policies products offered by insurance companies to go for? or should have mix of both? Just a thought…
    Jagrut Khairnar
    p.s. – reading the comments of this article was also a good learning for me

    1. Jagrut

      Yes, you are correct that one should be planning for all stages of child education. Regarding the “child plans” they are not that good considering traditional options for investments like mutual funds, PPF , FD !

  12. Priya says:

    Hi Manish,

    My son is 5 years old. I am looking at the following plans and unable to chose the right one. I would like to invest in guaranteed schemes only for child education.
    ICICI Smart kid, Met Life Bhavishya, AVIVA Young scholar and LIC Jeevan Tarang are the choices i am looking at. With my limited knowledge, i would like your opinion pls. Thanks for the updates on changes effec Jan 2014 on Life insurance. Looking to hear from you.

    1. I dont suggest for these kind of policies, here is an article you should read –

  13. Tejas says:

    can someone explian me the below formula

    Target Amount = Amount today X (1 + rate) ^ Tenure

    what does this ^ sign means??,,i am uable to calculate with the formula


    1. It means to the power . Ex

      2^1 = 2
      2^2 = 4
      2^3 = 8
      2^4 = 16 .

  14. Ravi says:

    Hi Manish –

    I have two kids. one 6 year old and other one 9 yrs old. I have LIC Term plan of 25 lakh (others offer more but i am not sure whether they are good, suggest better one please which is reliable). I do save about 10 K per month in PPF.

    By seeing the cost of education going high, now I am interested in saving more for my kids and create good amount of money by their college time. kindly suggest the BEST approach.

    Let me know your thoughts on,
    – investing in properly
    – Investing in PPF than Equity or MFs. Do guide me here.
    – Good SIP plan



    1. I think you can take some insurance from AVIVA , the premiums are really low .

      Also you can look at some equity funds for long term through SIP route . Like DSPBR top 100 , HDFC Equity

  15. Uma says:

    Hi Manish,

    Thanks for the excellent article for savings for a kid’s education.

    I have a son who is one and half year old. I have 5 lacs as fd which I will get next year. I am plannning to take a plan for my kid. As you suggested I amy need 60 lacs when he becomes 20 year old. Is it better to proceed with fd’s or any other plan. I dont have much knowledge of mutual funds. ulips and also I have a sbi smart ulip, which is not generating any returns. Please suggest. What about ppf savings ?

    1. Better take route of FD’s and mutual funds. You can start with HDFC prudence mutual funds to get comfortable in few years !

  16. Manoj Prajapati says:

    Hi Manish,
    My daughter 3 months old and now i am thinking for her education plan. i have a term insurance of Rs. 30Lcs. Can you please tell this is the right time to take Education Plan for My child. If Yes, then please guide me with best option.

    Manoj Prajapati

    1. the right time to invest is NOW . so do it at this moment itself , just that you might want to avoid “Child Plans” . Read this –

      1. Manoj Prajapati says:

        Thanks Manish for this information.
        I already opened PPF account for my dauther’s name and putting 1000/ pm. But this PPF is fixed for 15 yrs. But I also want plan to get money in her school interval every 4 or 5 yrs. So i can fulfill her dreams on time.


        1. Then PPF is not a suitable investment . you need to then get into FD’s !

          1. Manoj Prajapati says:

            then RD is Good Option for this

            1. Yes .. anything which can be liquidated when needed

            2. Manoj Prajapati says:

              thanks Manish.
              All your advise is usefull to everyone.

              Again Thank you

  17. Nikunj says:

    Hi Manish,

    Thanks for the great article, as always.

    I just was wondering what you would suggest for my situation. I’m currently chalking out a plan for the education and marriage of one of my cousin sisters who is 14 years old. The idea is that 3-4 of us cousins (all independently settled) will make a monthly contribution for this goal.

    I’m looking for a financial instrument which:

    1. will be under my cousin’s name, but should make it convenient for us to add monthly contributions. Online payment / NEFT/ ECS will be great.

    2. preferably be more equity focused in first 2-3 years and more debt focused subsequently. I can do this switch manually too (say from a balanced fund to a debt fund).

    3. should be relatively illiquid, to discourage pre-mature withdrawals.

    What would you suggest for such a situation? Thanks in advance and keep up the good work!


    1. the best I can think right now is to open a joint bank account with your cousin as primary holder and the other guys as secondary holder, and then setup a SIP from this account for Rs 3X to a tax saver ELSS fund or a tax saving 5 yrs FD , all you 3 people contribute Rs X to this bank account .


  18. shubhr gupta says:

    Hi manish
    nice article..
    please suggest some child plan also..
    i have calculated .. i need to invest atleat 7000 per month for my goal

  19. Ganesh says:

    Hello Manish,
    I just read your article about child Insurance plan its very nice. Decided to buy a child insurance for my son he is 9 months old. As you suggested we need money only when he pursuing higher education. We both parents decided to see him as Software Engineer or Dr. don’t know exactly, what will be the expenses in present scenario. Estimated i may need 10 Lacs and term 20 years to complete his education.

    One more thing is few years back i have bought LIC sigle policy for 3 Lacs sum assured and term is 21 years and yearly payment is 15,000 which i think is too much when compares to Religare iTerm Insurance. i wanted to close or sell this na buy new religare insurance but dont know how to do.

    Please suggest what will be the amount after 20 yrs for 10 lacs and procedure for closing the present insurance.


    1. First you do some number crunching using this calculator

      JUst stop paying the premiums , the policy will become paid up

  20. sukanya says:


    I want to invest for my child education and marriage, what kind of investment plan i should go for.. I thought of investing in Mutual funds for longer term around 15 yrs so that risk is less… Is this the right way to go for ….. could u give any suggestions

    1. Yes . I think thats a good idea .

  21. Amalendu Gupta says:

    Dear Manish,

    Nice article.

    Just one point – Contribution should depend on ones potential to save or earn. So it will probably be more real life if contribution is a growing amount starting with ‘X’ and growing at a rate ‘g’. And for simplicity, ‘g’ can be assumed to be equal to the expected growth in ones savings or income. I guess then X will come out to be a smaller figure than C and then one will feel more confident taking a start.

    Amalendu Gupta

    1. Amalendu

      There are two ways one can do it .. one can be a constant SIP and one can be growing SIP model … one can choose what suits them , read more on

  22. Jay Prakash Patel says:

    Dear Manish,
    I want to invest in e gold (Physical) from now onwards for 10 years. I want around 10 lacs at the maturity of the plan. please suggest me a plan for that.

    Jay Prakash Patel

    1. Jay

      e-gold is not in physical format . Please reconsider what you just said ? What plan you need ?


  23. amit says:

    Dear Manish,
    I want to invest in a child plan from now onwards for 25 years. I want around 60 lacs at the maturity of the plan. please suggest me a plan for that.


    1. Amit

      I would suggest you to go with SIP in mutual funds , read this thread :

  24. S.Manimaran says:

    the article is very useful for people like me who are not having such strong finance back ground or advised on that field.
    thank you for you hard work.

    1. S. Manimaran

      thanks for your comment .

  25. Puneet Malhotra says:

    Hi Manish.
    Great article – reading a lil late tho !!
    Could you plz help me with – which is the best ULIP Child Plan to go with & other than benefits (which seem to be similar in all, premium waiver etc) what should we look in different ULIP plans ??
    Hope you hear from you on my email.

    1. Puneet

      ULIP’s are something not for everyone ! . Its only if you understand equity and debt clearly and also asset allocation . Mainly look at the long term costs


  26. srinivasu says:

    thanks again for all this good work.
    Very happy to read from enlightened good readers.
    i think you are not convinced about education loans, requested your views.
    thanks in advance.

    1. I am not sure what you are asking !@

  27. boopathy ganesh says:

    one LIC agent says if u pay 2.50L for 15years then on 16th and 26th year LIC would pay lumsum of 50L. Can i trust this is. Is it practically possible.Kindly advice
    Boopathy Ganesh

    1. Boopathy

      Why dont you find it out yourself with this tool :

      Note that if IRR is more than 7-8% , then he is lying


  28. Anbarasan says:

    Hi Manish

    Very useful article. In particular, the Excel worksheet is truly nice. Just have a suggestion. Though the calculator is excellent for initiating the plan for investment, I am a little confused how to reevaluate the calculations after say a year. If, as per calculations, we needed to invest Rs. 5000 per month and accordingly, we start an SIP. After say 3 years, a certain amount would have been saved. Now when we check how the savings are going, how do we reevaluate the revised monthly saving amount, taking into consideration the fund value already built up. Would like to know your suggestions on this. Is it possible to include this in the calculator worksheet?

    Thanks in advance.


    1. Anbarasan

      Its a good thought . The way you calculate it is … You assume that the already generated money will still grow at same return number, and then you see how much it will add upto the target , for the remaining target number you again calculate how much more you need monthly

      I know its a bit tough to understand , but I will teach you how to do that soon .


  29. Nivedita says:

    Hi Manish,
    Very informative and useful article. I am following you from few months, but this is first time to comment here.
    The calculation part is really helpful.
    But my question is I am not sure what my both the daughters(one is 8yr and another is 3 yr old) want to become. So how am I going to plan and invest in which scheme? If I calculate wrong and invest where I will get less amount I will be in trouble or vice a versa!
    Can you guide me on it?

    1. Nivedita

      This is something you cant solve .. Its like some guests are coming to your home and you dont know what they would like to eat , so you keep most of the ingrediants at home and be prepared… if at the last min they order something , you might not be able to prepare everything , but you will be close to it .

      So in the same way you never know what they would opt for , but you already know it would cost some money , so take some average figure like 5-10 lacs of money today is required to do some post grad studies , so you might required the money in future which will match it later . atleast you will have some good preperation .. The idea here to to be close to your goal , not get 100% of it

      Btw, let me know the difference between wedges and french fries , i have posted a comment on your blog


      1. Nivedita says:

        Hi Manish,
        Thanks for visiting my blog and for the comments. I have already replied to your question in my blog.
        Thanks for the answer for my question here. Yes, you have given very good example.
        I really should think seriously and invest for my kids education. I need a proper guidance, as my husband has already invested in many LIC policies but nothing is invested for the education.

        1. You should setup RSS feeds via email on your blog so that we can get updates on email whenever you post any new post .

          See this

          Regarding your kids education ,yes you should be thinking about it .. Read more articles on my blog , and once you feel a lot of comfort with , you can also think about our paid services . Till then just read more and ask your questions at our forum :


          1. Nivedita says:

            Thanks Manish,
            I am reading many articles but most of the time all the information goes over my head(Sorry) I am not a commerce student and these investment things were never in my plan, I don’t like these money issues at all(:-)))))) )
            Let me take some more time, I will be discussing these things with my brother who introduced me to your site here.
            Hopefully, very soon I will be getting the things inside my head.
            And thanks for the suggestions and I would be thankful to you if you could get some time to set my blog in a proper way.
            I hope I am not taking disadvantage here.

            1. Nivedita

              Being a women , you will know how important it is for a men to know some basic coooking , not because he wants to becomes a world class chef , but for situations when his wife is not there or his mother is not there, he can prepare some decent meal and feed himself and his children . Else if god forbids the world ends and he didnt knew how to cook , he will first spend a lot of time in eating bad food and then making lots of mistakes .. Try leaving your husband in kitchen for 2 months without you and see his situation (assuming he cant cook at all) ;

              In the same way personal finance is for you , you are not learning it because you want to become a financial planner , you are learning it so that you can take some good decisions for your children , your household and to make 1 crores instead of 50 lacs for your retirement .

              Just like cooking is as much as men’s domain , personal finance is a women territory too .. You should not aim to become a pro in this but atleast learn to a level where no one can fool you and you can take charge of important things in life incase of emergencies .. the fact is that we dont learn these things (especially women) , because they never require it . i would like you to read this article first of all :

              Guess what : there are 500 members like you on , who are waiting for you to ask all the dumbest questions you can imagine and they will be answering it with all patience (including me) and we are all there to help you take your financial life to next level . Just register and start asking all the questions as it comes to you mind . A dedicated 30 min each day or even 15 min a day on our forum for next 1-2 months can turn you from a novice to a knowledgable person . Alteast browse through all the earliar questions asked and learn from them ..

              Shout for support !

              I can help you set up your blog , it should be some commitment from yourside , not a big thing .. You aim should be to become something like one day !


            2. Nivedita says:

              Hi Manish,
              Thanks for the reply. And thanks for the link,, I will read and go through it today.
              What should I do for my blog settings,
              You can send me the mail to

  30. Sumeet says:

    Hello Manish, thanks for another wonderful article. Do you mean to say that plans like Smartkid Maxima and Komal Jivan should be avoided at all costs? And all the goals can be acheived by using mutual funds itself? Kindly clarify.

    1. Sumeet

      Yes and No . You have to understand that those plans also investing in the same things like mutualfunds , which is equity markets, the only place where they differ is that they give some options which are not there in mutual funds but you can create them yourself , just because they give you customized product ,they put all kind of charges and eventually a person who do not follow-up much on the product looses in long term .

      So you can always learn abit and manage things on your own through mutual funds


  31. Judy says:

    The cost of my son’s education today is 48,000 today.
    I wonder how much I have to make if my son has to do a course in MBA.
    Now he is in the III grade?
    The calculation does look scary.

    1. Judy

      Is the cost of the MBA today is 48000 ? Is it in Dollars ? Because in India it should be atleast 6 lacs


  32. Vineet says:

    Hi Manish,

    Thanks for all the articles on your blog. They are all amazing, simple and very informative!!

    If we use the “Child Education Contribution Calculator” excel file, link for which is given in this article, monthly contribution comes to Rs 3098.00 [Value in Today’s Term – Rs 8,00,000.00, Average Inflation Expected – 7%, Years Left for the Goal – 20, Return Expected – 12%]

    However if we use the calculators – Goal Planner under the “Resources” section and enter the values as given above, monthly contribution comes to Rs 3580.00 (constant contribution).

    Please can you let me know which is correct and to be taken for financial goal planning?


    1. Vineet

      Better take Calculator value under Resources section .


  33. Madan Mohan says:

    Mr. Manish,
    As you will be aware, there is a tug of war between IRDA and SEBI for ULIPs. IRDA is going to change some rules of ULIPs from 1st July,2010. Based on it, Can you please suggest whether I should go for a child ULIP right now or should I wait till 1st July. My birthday falls on 1st July, so mortality charges will be higher for me after that. I have planned to take ICICI Prudential Smartkid maxima. Any comment on this will be also welcome.

  34. subramanyam says:

    Amazing how many people are ‘analysing’ ulips! Do they understand the impact a 1% change over a 20 year period can have? And this can come from higher lapsation, higher mortality in India (mortality rates are not guaranteed), fund manager underperformance, market underperformance, increase in cost structure..If you do not make a career as an actuary you cannot understand ‘reverse financial engineering’ necessary to do performance analysis. Warren Buffet says ’80 years may not be sufficient to draw conclusions based on data’. Amazing Overconfidence – comes from a market that has gone up from 9k to 17k ??

    1. Subra

      What is the conclusion your comment at the end ? Are general investors better investing in Child ULIP’s or DIY strategy ? Let us know ?


  35. Chakrapani says:

    Hey Manish,
    I happened to read your article “10 tricks agents use to fool customer’s” in Economic Times today and just thought to visit your site. I had abt 5 mins or so to see what you have on the site and am on it for past 30 mins. Some of your articles are really amazing. Great job man. Appreciate your efforts. Your child education calculator is a generic calculator and can be used for ones financial planning too… Correct me if I am wrong. I would like to connect with you on linkedin and have sent you a connect request. Kindly accept. I would luv to discuss with you further things through e-mail.

    Take care man n keep up the good work

    1. Chakrapani , thanks 🙂

      I have accepted your invitations , mail me if there is anything 🙂


  36. SJ says:

    Hey Manish

    What is the formula you have used in Step 5 called as? I’m trying to compare this with the CAGR formula.

    Say I want 4 lacs after 14 years at 12%. Then if I use the formula given in step 5, I arrive at a figure of 926 Rs per month, thus in 14 years I’d be investing 926*12*14 = 155568 Rs.

    But if I use CAGR formula then arrive at a figure of 81848 Rs.

    Shouldn’t both amounts be same?? Am I missing something?

    1. SJ

      Actually you need to reverse engineer the formula of annuity .

      Future value = Contribution per month * (1+r) * [(1+r) ^ time – 1] / r

      So Find out Contribution per month as = Future Value /{(1+r) * [(1+r) ^ time – 1] / r }


  37. Ashish says:

    Dear Manish,

    I wud like to take a Icici smart kid child plan on monthly contribution of 3ooo/-
    i do have adequate pure Term policies + Equity mutual funds@monthly basis +EPF +PPF.

    i am attracted towards the premium waiver benefit in child plan. (i.e contibution by company incase of mishap)

    In case of any eventuality,
    Benifits are :
    Sum assured ( small amount)
    Balance premiums are paid by the company to the child corpus
    and getting accumalted on monthly basis till attains 18 years.
    and the total amount would be given to child after 18 years.

    My Insurance Term cover would defintly help in the eventuality, at that point of time.
    But i do need some assurance for my child also after some period/tenure say 18 yrs towards marriage/education.

    1. How do u view on this child policy with premium waiver benifit/ as a child assurance.
    (I do have SIPs on monthly basis for child).


    1. Ashish

      I would say you are attracted to ULIP’s over mutual funds for child education because you get this feeling of “responsibility delegation” , you are feeling that if you are not there , they will take care , how ever , understand that ULIP’s are just a tool for wealth creation and nothing more , all the manual work of taking investment and using is still lies with people . Regarding the “Premium waiver benefit” , you can increase your life cover by that much amount and invest in same old mutual funds , may be balanced funds this time , incase you are gone , the extra cover from term insurance will take care of the gap .

      I feel you are looking of putting money in “something else” other than mutual fund , which can be wrong way of seeing thing , if you have 4 goals , you can use mutual funds for all goals , may be different types of funds ,use index funds , use ETF , mix debt with it and Gold ETF’s etc .


  38. Nitin Gupta says:

    Hi Manish,

    As usual nice article. But i am not sure that i agree with you or not, because whatever information i have about a child plan which is HDFC Yound Star Super Suvidha(spl, online plan), it looks better to go for it than going for other options that you gave(MF+ Term +etc) and managing them. btw i already have a term plan for protection which is 6 times of my anual income, so its not that i totally depend on this ULIP. I am going to treat this ULIP as MF with switching facilities. The ULIP that i wanted to buy is having following details:

    Premium Allocation Charges:

    Tenure=15 years
    Tolal Premium allocation charges in this tenure=54% of anual premium. But at the end of 15 year, as a bumper addition, one year anual premium is added.
    so looks like both these things(charges and bumper addition) are compensated with each other. so no loss no gain.

    Fund Management Charges:
    its 1.25 %. I heard that for mutual funds, its 2.5% so here looks like this ULIP is better than MF.

    Policy Admin Charge=50Rs per month.
    dosnt look much to me, as it is constant and independent of premium.

    24 switches are free per year.facility properly. Moreover i have lil bit knowledge of market and will be using swithing So after these details, do u see that i am missing something and decision is not right. please let me know.

    Nitin Gupta

    1. Nitin

      It might happen that this ULIP will suit you .. ULIP can be ok for people like you who know how to take advantage of switches at right time . So you can continue .


  39. Anju Matta says:

    Hi Manish,
    I have two kids ageing 9 and 13 and I want to invest for them for equcation & other requirement. I can invest 40K every month. Pls advise in which plan, units etc i need to invest to have better mature value.


  40. Amit Jain says:

    Again one more worth reading Article….
    Apart from this i feel that situation will not be this much grim as we feel after 15-20 years as the government is working on education facilities, like they are coming up with some educational loan which can be repay at later stage at very less interest rate.
    I feel that if a child want to get admission in his fev colleges then financing that will not be a issue and if somebody is passionate about his study then that guy will deifnitely arrange some money in a form of loan or so.
    Here i am not trying to rule out the responsbility of parents to arrange money for child education.

    1. Amit

      Nice point , we never thought of this that in future Govt help can be a big relief and a big help 🙂 .

      So do you think when parents plan for child education , they should factor in this fact that in future govt help will be there ?


  41. sandeep says:

    hi manish, i recently got hooked to your site. must admit amazing articles in simplest possible language.

    my query, I’ve some lumpsum to spare for my child education plans. child is 1 month and term i’m looking at is 20 yrs. I tried to do some calcs based on simple 10% annual returns….scenarios i took were lumpsum investment at yr1 or yearly investment till 20 yrs. the returns are phenominally higher if i apply lumpsum vs annual. now issue is what kind of product i should go for? i’ve a term insurance already planned so dont want to go for any cocktail products like unit linked child plans etc…any suggestion would be really helpful….

    1. Sandeep

      You should be looking at simple equity products like Equity MF , ETF or index funds . look at to get some good funds . Dont forget to rebalance your portfoio every year or 2 yr to make sure your asset allocation is in place . Did i answer you ?


      1. sandeep says:

        thanks manish. how are the investement plans like SBI unit plus III single….issue is i’m not very confident in applying lumpsum on my knowledge and not sure if i’ll get to follow when to rebalance portfolio etc….but one thing i noticed with SBI or another like Kotak single invest….they are charging heavily on charges….is that something going to be substantially lower if i directly apply for MFs

        1. Sandeep

          these are ULIP’s , dont get into these . buy plain mutual funds directly from fund house .


  42. Sandeep says:

    There is a plan that Kotak AMC offers. Its called Kotak Starkid, it has all the advantages that you can find in an ULIP, without its drawbacks.
    It works as an SIP. You ought to choose from their top performing funds Kotak 30, Kotak Opportunities & Kotak Taxsaver. You can choose a term of 5,10,15 or 20 depending on your age. There is an in built insurance with sum assured equal to the no. of SIP instalments pending. The reasons why i would recommend this over any ULIPs are:
    – There are no charges other than expense ratio.
    – The liquidity is far better than in most ULIPs, which have lock-ins & restriction on no. of times you can withdraw & the amount you can withdraw an one go.
    – All the three funds are pretty old & have given good performance. Today probably no one know how good are the fund management skills of most of the ULIPs.
    – In ULIPs, in case of parents death the future premiums get paid over the period of time, in this plan, the SA is paid upfront in lump-sum.
    In ULIPs there is a lock-in period of at least three years, in this plan there is an exit load(1%) if you exit before 5 years. Hence if the fund doesn’t perform we can get out of it at minimum cost.
    You can find more info about the plan from the following link

    Sandeep Kulkarni

    P.S.:I have invested in this plan for my daughter’s future.

    1. Sandeep

      Yes , its a good plan . The fact that its nothing but simple Mutual fund + Term insurance makes it good . You can do the similar thing seperately also if you want to diversify across other mutual funds .


  43. robert says:

    I am salaried employee who earns 45000 p.m. I do have icici life insurance cover for 20lakh. Took two pension plans with ICICI for 10000 & 15000(per year) respectively. I am married and blessed with a baby boy(4 months old). Planning to invest like this.
    PPF –> 24000
    MF –> 36000 (suggest me some funds)
    Term insurance –> 50lakh cover ( suggest me which company is best )

    is it advisable to continue to the pension plan., or you suggest taking the money out and investing else where?

    Thanks, robert.

    1. Robert

      Regarding PPF + MF , the ratio of contribution is very personal and it will depend from person to person . If you are high risk taker , you can even raise the MF part . But overall it looks ok . See : for a list .

      term insurance is a tricky part , while I advocate taking the cheapest one in the market , it can again depend on your comfort level , are you fine with AR or SBI or any other non-LIC company , if yes , you can split your insurance with iTerm from AR and Another insurer .

      Regarding pension plan , again its nothing but a Unit linked plan , which we dislike for reasons we have already discussed on the blog. your call .


  44. Shyam says:

    Recently I started monthly SIP in HDFC TOP 200 (5000/-) and VIP in Benchmark S&P 500 monthly(3000/-). This is my plan for my 5 months old daughter’s higher education. VIP is a new concept introduced in india by Benchamark.

    1. manish says:


      VIP looks good at the moment . I am aware of it . you can continue with it . Just understand that you are taking a high risk instrument and you need to be with it for long term and dont get afraid with the short term fluctuations .


      1. Shyam says:

        My plan is to continue VIP for 10 years, then after I will revisit it.. VIP investment is through ECS route.. One thing I found in regular investing is that, if I do through ECS, I tend to think less about fluctuations and not many worries about it… but if doing SIP through my broker, I found that I tend think of stopping SIP when things are going other way..the reason seems to be we check our account regularly and see what is happening to the investment, and the stopping SIP is just a CLICK away.. but if it is through ECS, some manual work is involved….

        1. manish says:


          Yes , that is a good reason . However we can check things only with VIP also ? NO ?


  45. Ansari says:



    1. Ansari

      How can you use the same things for ULIP ? How do you think ULIP be better than MF + Term combination ?


  46. Siddharth says:

    Thanks for reply.
    the term t -1 is a single term right? the way excel treates this is different. Thats what I am trying to point.
    whether you have (12*t-1) or just (t-1) its a unique item raised to the (1+r)

    as you have said its tenure in months minus 1, but the way its in excel sheet its deducting 1 from total value of the denominator and not from the tenure only.

    1. manish says:


      Ohh ok .. I got it now .. I never know that excel does not work that way 🙂 . I have made the changes to calculator 🙂 . thanks for the contribution


  47. Siddharth says:

    ok got around posting.
    heres the link

    1. manish says:


      Looks like the confusion is because of “payment in the start of month” or “Payment in the end of the month” . So normal FV formula in case you pay in the start of the month is

      FV = A * (1+r) * [(1+r) ^ t -1]
      Where A is the amount paid per month and r and t are rate and tenure . Now if you reverse the formula to find out per month A

      It would be

      A = FV / [(1+r) * ((1+r)^t -1)] . This is what I used in the formula .

      Still the confusion remains . 🙂


  48. Siddharth says:

    check out the image I will upload on twitter. that will show the formula in best format.
    will post right now @chnmanish

  49. Siddharth says:

    I have noticed error in one of the excel sheets.
    Child Education Contribution Calculator
    This is what the sheet has
    And this is how it should be
    Please note the last parenthesis in formula, whole denominator is getting 1 substracted.

    Hope you correct the excel sheet.

    1. Siddharth

      Looks like there is some confusion . I think the formula is correct . So in the denominator “- 1” part is for (1^t – 1) . where t = 12 * G5 because we want to make tenure monthly . So as per your fomula it will subtract 1 from G5 where G5 is number of years . Please recheck the formula is you are clear or not ?

      Let me know if you agree, or may be i need to relook .


  50. saurabh prakash says:

    Dear ManishSir
    Thanks alot for providing details
    I have taken apolicy from Max New York Insurance endoqment-Whole Life Participating
    to Age 100. I Have completed three year, please advice should i continue or withdraw.

    1. Saurabh

      Mostly we are against any things which has “Endowment” or “Whole life” in its name . What are the rules as per policy documents if you stop after 3 yrs ? What are the long term returns from this plan ? Ask for the IRR from your agent or company .


  51. Nilesh Panchal says:


    Good Explanation. I have 3 Year Daughter and for her education I have started Bharti Axa Equity Growth Fund in Daily SIP of Rs.300. Let me know this is good or not.
    .-= Nilesh Panchal´s last blog ..Communication Skills for Children =-.

    1. manish says:


      What was the reason you invested in that ?

      Its a very new fund with no track record and its not from a good fund house , atleast not from a fund house with track record .

      Anyone pushed you buy that ? or was it your decision ?


      1. Nilesh Panchal says:

        Hi Manish,

        No body forced me to invest. Its my decision to invest in Daily. Why? I know its new fund. What are your views is my decision wrong?
        .-= Nilesh Panchal´s last blog ..Communication Skills for Children =-.

        1. manish says:


          As a thumb rule of mutual funds investing , we say that historical performance is a great indicator of future performance . So investing in a totally new fund which does not have a track record does not seem to be a good idea . Apart from that it comes from Bharti AXA , which has no famous history in mutual funds performance and can not complete with other AMC houses .

          Note , it does not mean that fund is bad . It means you could have taken a better well knows funds . The risk is high here .

          How does this daily SIP thing would ?


  52. Pratik Hiwale says:

    Hi ,
    The agent had given working with both 6% & 10% per annum .
    the IRR is as follows
    A Assumed Investment Return 6.00% 10.00%
    B1 Premium Allocation Charge 0.70% 0.81%
    B2 Policy Administration Charge 0.42% 0.41%
    B3 Fund Management Charge 1.32% 1.37%
    B Reduction in Yield due to Expenses [B1 + B2 + B3] 2.44% 2.59%
    C Reduction in Yield due to Cost of Risk Benefit 0.38% 0.37%
    D Reduction in Yield due to Service Tax & Education Cess 0.31% 0.32%
    E Additional Benefit in the form of Loyalty Units 0.11% 0.12%
    F Additional Benefit in the form of Bumper Additions 0.00% 0.00%
    G Net Reduction of Yield [ B + C + D – E – F] 3.02% 3.16%

    H Return on Investment [ A – G ] 2.98% 6.84%

    i have not done a switch bcos of the volatile market which was there .
    after reading ur blog it seems the Sum assured for this policy is very less ( 3Lac) for 24k per year of premium which i’m paying .

    I have other MF like HDFC tax saver (growth + dividend), HDFC equity and HDFc top 200 .
    LIC for a secondary assurace .
    Pls advise

    1. manish says:

      The ULIP you are talking is not worth investing in that case . The IRR of 6.84% is too less with 10% return .

      You should better take a Term cover and do goal based investing using other simple things like MF + ETF + PPF + FD + Gold ETF etc

      What is your age ? I think you should have more than 50 lacs+ worth of insurance requirement which you can get in less than 10k per year . Rest you can invest .


      1. Pratik Hiwale says:

        Dear Manish ,
        Thx for the advise .
        also i’ve Aegon Religaire’s iTerm a good plan for 50lac for just 7k/mnt .
        doubt is where AR will be after 25 years.
        my age is 30 years , also the ROI of 6.84% is just a example given as it will vary as per the market , can’t i drive is with adding more percentage for equity fund for better return after 19 years .
        also i’ve have 6k/mnt is HDFC MFs(top 200,equity,tax saver) , 4k/mnt in LIC jeevan saral and money plus and this 2k in HDFC youngstar plus II .

        Pls advise as which is a good standalone child plan .

        1. manish says:

          AR is backed by Aegon which is strong in insurance field .Even if its not there, it will be taken over by something . So you dont have to worry that much .
          Solvency ratio is there for this problem only .

          ROI from ULIP may be different but still IRR is a unit to compare ..

          There is nothing like Best policy . You to find one for your self .


  53. Pratik Hiwale says:

    Hi ,
    I have HDFC youngstar plus II plan for my kid when he was 4 months old . its almost a year .
    i have the option 20 or 25 free switches which i can make online between growth,eguity or balanced fund which is a good option .

    Pls suggest for a good LIC plan for child’s education to balance my profile.


    1. manish says:


      Do you know what is the IRR of this policy ? Are you competent to do switches efficiently ? Do you know what is the proper asset allocation for youself ?

      Why you need a LIC plan only ? And what do you think about using standalone products like MF , ETF’s, GOLD to plan for child education ?


  54. senmar says:

    It is a great blog.

    1. Thanks senmar

      Are you a new reader or a quiet reader . What are the products you are comfortable with ? You invest in MF ?


  55. Gopal says:

    I heard from someone that it takes 15 to 25 Lakh for an MS degree in US and for MBA its even more. Not sure if these numbers are correct or not.

    If we assume it is correct , ambitious parents need to accumulate around 1 Cr to 1.5 Cr . 10% rise + 20 years to go.

    If you look around, Parents normally arrange these amounts by taking loan ( most percentage ), selling property/gold and some are lucky parents who are RICH / Big Posts who can easily afford.

    My question is , does anyone has a case study or real life experience of planning this long term goals and obstacles/Challenges faced during the the journey and also the list of mistakes made so that we can plan accordingly and learn from it ?

    For me it looks like , it is very easy to say , we need to invest X amount of money every month for 20+ years in order to achieve this goal. But Life offer so many unexpected events which alters our plans from years to year.

    Having said this, My plan is little different. I am planning to invest around 10Lakh in the next one year ( Thanks to minimum wage of USA ) with the hope that I can go near this magic number in 20 years down the line without much stress of investing monthly. Having said that i need a proper asset allocation + rebalancing and may be little funding every year

    along with this long term plan, i think we need to invest in our own Career Development so that by the time we are X+20 years, we can reach good position in our career with the hope that Salary/Savings can easily fund these necessities.

    1. manish says:


      Regarding your question about MS or PHD , there is one thing you have to consider , the education inflation in US is not like India . Its around 4-5% in US. so the actual amount needed will not be 1 crore . It will be lesser .

      The fact that till now parents have given education to their kids by selling property/GOLD and taking loans because they never planned for it . but we dont want to make our situation like that .

      Regarding one time investment of 10 lacs and letting it grow . I would suggest that you invest this in Debt fund and then invest in equity through STP . that way you would not get shock if markets tumble very fast .

      Also in our calculations we have not considered increase in income . so you have to factor that in also when you calculate it .


    2. Vikram Pattabiraman says:

      Mr Gopal,

      I have my MS in the USA…I didnt spend a dime..It is not Rich/poor dad abt sending children to the USA..It is the will to succeed…The University offers jobs on campus and scholarships as long as the students have good academic merit.

      My grandfather was a very very rich man but my father lost most of the wealth due to bad wealth management..I am trying to win it all back…It is not important just to save money for the children, I think it might be advisable if you can make them work for it and have them understand the value of the money right from childhood.

      Yes, I plan for the future…But I have no plans in giving the children the money to blow away until they can prove that they can use it wisely… As Swami Vivekananda said “Plan for the future but don’t sink in it…” Just my thoughts…

      1. manish says:

        “Plan for the future but don’t sink in it…” This is another problem I can see in todays world . People sometimes invest to much of their income that they dont live their present life . This is dangerous .


  56. Sandeep says:

    Just to take part in this discussion,
    Invest in India and take the education in foreign universities where inflation is low US,UK 😉 Ultimately our goal is to provide best possible education.
    If i take Harvard business school(forget abt the seat) ,with 3% inflation will end up with 77 Lakh rupees at @50 INR,ignore the INR appreciation.

    1. Sandeep

      That is great point . if your target is foreign universities then you can think about this , but what is the guarantee that your kid will make to foreign education .


  57. Arwa says:

    Another of your excellent post..Though the formula looks scary, but it is really nice to know about it. Sometimes one tends to forget about the inflation thing altogether but this post showed how much a difference it can make.
    Thanks for such informative and encouraging writing!!

    1. manish says:

      Hi Arwa

      Nice to see your first comment here . Did the formula look that scary . Believe me these are the basic things one should know . I will soon try to come up with calculators 🙂

      What are your views on inflation in long run say 30 yrs ? What are the best products you understand and are comfortable with ?


      1. Arwa says:

        Hii manish, nice thought to come up with a few calculators 🙂 Regarding inflation, yes, in 30 years time it makes a lot of difference..It is one most important thing to keep in mind while doing any kind of financial planning.
        I have basically read a lot about a number of financial products ranging from equities, to mutual funds, to gold, real estate, ETF’s etc. I got interested into finance a year back and then started my self study on it. Aim to become finacially literate enough to become my own financial planner..And ofcourse your blog plays an important role in this endeavour.

        1. manish says:


          Thats the mission for this blog . to make people aware of what they can do themselves . I am glad I have knowledgable readers like you on this blog . What other blog/sites you get your education from ? Any books ?

          Do you also trade/invest in stocks ? What are your views on Markets in next 5 yrs ?


          1. Arwa says:

            Thanks Manish..Its just the beginning I guess, long road to go.
            Have read the intelligent investor, cash the crash, dhandho investor etc..What are the other books that you suggest?
            Regarding 5 year approach, definitely I consider India as a fast growing market on the path of achieving even greater heights..It has the demographic advantage, people purchasing power, the industries, the zeal of the people and great entrepreneurs, also its not too dependent on exports, the fiscal deficit is under I believe 5 years down the line India can go in only one direction – Up.
            I am new to the space and keen on learning things!! Nice to connect with you here.

            1. manish says:


              I have not read all the books , just read a bit of Intelligent investor . I am sure india will go up for the reasons you mentioned .


  58. Brij Mohan says:

    Great Article,
    I was very poor in these future planning, every time I read your articles get to know something new and add in my list.

    EPF + Medical Insurance + PPF + Term Insurance + Planning for Child Education + Child Marriage + Retirement Plans + Gold ETF, Equity MF… am I missing something from my list, to secure my present as well as my future?

    1. manish says:

      Brij Mohan

      You are missing some things like

      – Emergency Fund
      – Tax planing
      – Estate planning


    2. Vibhav Nayak says:

      Well, it should it be Child’s Marriage and not ‘Child Marriage’ 😉 hehe..

      1. manish says:

        Hehe .. Good one . Humour on Financial planning blog is good 🙂


  59. Venkatesh says:

    Hi Manish,

    Good article. I was also planning for my son’s education, and did research on all the investments options available. I thought MF and Term plan combination works well because ULIP child plans were very expensive last year (as high as 60% PAC for the first year). But main problem I found with MF and Term Plan combination is that SA is given to nominee after immediately after the death of life insured. But while planning for child’s education, money is NOT required as immediately but is required only after certain number of years (because fund may be misused for some other purpose). I checked for a term plan that does NOT settle SA immediately but after the predetermined time, but there are no such plans in the market. Here child plans are better as the fund value is given only after the maturity of the policy. But disadvantage is that when the claim is made insurance company just invests future premiums to the funds as allocated by the owner of the policy when he/she was maintaining portfolio and it will not give right to switch funds by the nominee if he/she is minor and in the child plans usually nominees are minors. Let us taken an example of person who takes a child plan for 20 years and after paying premium for 10 years he dies and assume that he has all his funds in Equity. As per the policy insurance co pays SA to nominee starts investing future premiums in Equity. But during the 19th year if the market crashes, there will be major hit for fund value that child gets!!

    Do you know of any solution for above concerns?

    So as of now I am continuing with term plan and MF combination. Probably I may buy ULIP if all the above stated conditions are met because ULIPs are much flexible (as far as fund management is concerned because of the tool ‘switch’) when compare to MFs.


    1. manish says:


      If there are issues with Term + MF , let us find solutions for that and see how we can solve it. just take Term + MF will not solve all the problems . The main thing what we need is that Child education is secrured . this is the primary concern . So what will happen is that when you take Term + MF . there are two cases .

      Case 1 : You never die : in this case at the end of the tenure you will have the required amount .
      Case 2 : You die in between : In this case you cant contribute the future invesments , but your dependents wil get a big lumpsum amount (this will be quite big and has to be such that it can take care of all the needs) . Now from this insurance amount there has to be some part which can be invested lumpsum into somthing which can increase in value overtime and provide the final corpus when needed .

      The calculation of how much it should be must be done by you 🙂

      Doubts ?


  60. M Chakrawarty says:

    Hi Manish

    Good one as usual..
    I think the useful part is the quantitative bit which most of us hate to do..I looked at a figure of 7 L today as that is good for a decent and relevant education for my kid. Of course even with that figure the FV looks bit scary. My kid is 6 now and I have already started investing 18K pa (which is of course much lesser) in MF in his name. Will scale it up soon..

    Any idea if I can open a PPF account in my kids’ name..

    I have just managed to convert my LICs to paid up mode and am switching to term insurance. So will free up something there.


    1. manish says:

      M Chakrawarty

      Yes , you should bump up the investment , calculate the requirement and then start investing monthly .

      Regarding your CHILD PPF , you can open one in your child’s name and you can become guardian . Just that the total tax exemption you can get from both of your contribution will be 70k ,

      Good that you have made your LIC paid up . Its a good decision . Which policy you had ? What mutual funds do you think are good one ?


      1. M Chakrawarty says:


        Thanks for the info on PPF.

        It took me a while to get LICs converted but finally done. I have three policies – Money back, Jeevan Shree, and Jeevan Suraksha..Am continuing with Money back as it almost run thru.

        I have always believed in Diversified funds. I have mix of large cap, mid cap, marginally sectorial funds. Have been investing in HDFC Top 200,DSPBR Equity, Reliance Growth, DSPBR TIGER, and one balance fund in HDFC Prudence. For my kid I have chosen Birla Frontline Equity. Have Reliance Banking as miniscule component which was started to capitalise on Banking sector crash during 2008-2009.

        One thought for people who have been considering education in US. There is a lot happening in educator sector in India and Govt’s heart is in the right place though pace is slow. Lots of good US universities are looking at India as next destination. Incidentally Harvard Yale and one more US University is looking at setting up innovation centres across country.


        1. manish says:

          M Chakrawarty

          All your funds are great . Do you think your LIC policies will be good enough for your retirement life ?


          1. M Chakrawarty says:

            Nope my insurance is definitely not enough..I am addressing the same currently by going for term insurance..(now that i made my endowment plans paid up). I didnt scale this up till date as my wife is also working and well covered. and we dont have any liabilities currently in terms of loans or credit.

            Regarding the education in US..I dont know how many people are considering the impact of forex. It might play a big role in undervaluing or overvaluing the planned figure.

            1. manish says:

              In that case you should look for good term plans .

              Regarding Forex issue .. You have a strong point which even I did not consider . Its tough to predict the forex movement and definately for long term . But we can guess that US dollar would definately get weaker and weaker over long term given India and China coming up as future super power 🙂

              Nice point from your side . .Kudos ..


  61. Vinod says:

    Hi Manish,

    I am a regular reader of your articles and suggestions given to individual queries. I was really impressed by the way you had shown the inflation calculations and the excel spreadsheet was really useful to anaylze the requirement for the education of children.

    As per your suggestion in the earlier articles, i am in the process of shortlisting around 3 -5 equity mutual funds for my child, so would it be wise to have 3 – 5 mutual funds.

    It would also be great if you could suggest some equity Mutual Funds in the Equity Balanced, MIP, Sector Funds.


    1. manish says:


      Following two articles give you some good funds

      however, to find out different funds in different categories why dont you pick them up yourself . I have already taught how to do that in

      Questions for you

      What are the best education courses we can give to our children ,. What did you think about your child ? What are the products you will choose and what are the concerns ?


  62. Rakesh says:

    Very good article as always, cleared lot of doubts.
    Way to go….


    1. manish says:

      Thanks Rakesh

      How did this article help you . What part did you learn here ?

      What products do u think will be good for you ?


  63. pattu says:

    One past point reg graduate study. Being an educator I meet poor students who want to study more. I always encourage them to go for a PhD. This they will earn a handsome stipend pay their fees and send money home! In fact if you have bright kid and can afford study in the US encourage your kid towards a PhD instead of MS (if you think your kid can handle it). This way you don’t have to pledge your house and many people do these days for MS programs without scholarships in the US. This is complete Madness!

    1. manish says:

      Nice point . I have 2 of my friends who are doing PHD in US and making some money also 🙂 .

      But dont you think most of the poor students dont have the motivation for this . I mean they dont feel confident that they can also do this . I am totally with you on this one .


  64. pattu says:

    Another important issue wrt to child planning is cost of undergraduate and graduate education. Since graduate education costs are incurred 4 years after the start of undergraduate costs, if you you plan well those 4 years can be used for compounding.
    Having a diversified portfolio helps in this regard. We have take part of the corpus for undergrad education and let it grow for grad education. If the child wants to go to a job after undergrad well the extra money could become your old are health fund or boost your retirement corpus!

    1. manish says:

      Thats a good idea . the article teaches the idea , now each one can customise their plan as per situation 🙂


  65. pattu says:

    Great article Manish, agree that its safer to take inflation @ 10% instead of the 7% taken for retirement planning. My risk appetite hovers around 50-60% equity so I usually take only 8% return. An underestimate perhaps but I strongly believe in what you wrote:
    “The key to happiness is low expectations”.

    One thought for your calculator:
    The interest can be made adjustable depending on asset allocation which would be the input
    That is 100% debt –> 8%
    100% equity –>14% (say)
    and anything in between a weighted average.
    Another possibility is reverse the calculator and accommodate variable monthly contributions. That is calculating corpus for 5000 p.m in 1st year, 5500 p.m. in 2nd year and so on.
    This will also help people like me because I cant afford 11000 p.m. right now but only a couple of years later. So revising the calculator will help me determine modified corpus. I am trying to modify your calculator in this way.

    Thanks again.

    1. manish says:

      thanks Pattu

      Why do you take 8% return when you have 50-60% allocation in equity ? What is your return expectations from Equity ?

      Your idea of putting variable contribution is great 🙂 . I thought about it but didnt do it .
      It actually makes sense . because over time a person salary will also increase and then he can contribute more then . Let me see . why dont you come up with that 😉


      1. pattu says:

        Good idea to upload the calculator. As for me taking returns as 8%, I have invested in ELSS funds but I usually underestimate a lot. So that I am not disappointed in case my expectations are not met. Which is why I began my retirement and child planning very early to make up for the low return calculation!

        1. manish says:

          Hehe .. You have hit the nail !! .

          Expecting low and trying to keep your investments early is the best thing . Good one . But at some point of time dont you think if you underestimate or being conservative is forcing you to invest more than what you actually should ?

          Your comments ?


  66. Srinivas says:

    Nice article Manish. In my case, today’s value is 8 lakhs and after 24 years future value will be 80 lakhs. I already started SIP of 5k with this goal in mind.
    I feel Equity MF, ETF, PPF and term insurance are enough. No to ULIP.
    just 5 years before the goal, I am planning to initiate Systematic Transfer plan to more safe debt fund or I will withdraw and keep depositing in the PPF account (opened in my name, child name, wife’s name) which matches with the target date.

    Few questions
    1. I am thinking of atleast 20% returns from Equity diversified MF (based on Valueresearch 10 year old equity diversified funds) Is it fair enough?
    2. Can equity tax planning MFs are better than equity diversified funds in terms of capital security? (though returns are little less)
    3. Tax exemptions for Equity MFs are allowed from past three years, but I see equity tax planning funds which are 15 years old? Why did they start Equity MFs with “Tax” name in it when it was not used for Tax exemption 10 years before?

    1. manish says:


      Equity MF, ETF, PPF are good option , U should also consider Real estate , Gold etc also to diversify .

      Regarding your questions

      1. 20% return is little more than we should expect . Dont remember than in last 10 yrs we also had 2003-2007 , which were the mind boggling years in equity . So if you see overall 28 yrs , equity returns are in range of 16-18% , Better be little conservative .

      2. Equity tax planning MFs are same as equity diversified funds . Just that you get tax benefit from them and the fund manager can use it wisely because he can take risk of locking the money in some good share .

      3. I dont think so , ELSS were there earliar but the exemption limit was small (10k) . Where did you read that it started from last 3 yr only ?

      Questions for you

      1. What is your age and risk appetite ? Are you a risk taker ? If yes then you can try some direct equity .
      2, Can you diversify in real estate ? thought ?


      1. Srinivas says:

        real estate to me (other average income ppl) means owning a house, but in current situation buying a house in bangalore, i will end up paying huge EMIs for more than 20 years. please explain what do you mean diversify in real estate?

        yes. 20% may be too much. on a conservative side we can expect 15% in equity diversified MF.

        From the website, i read ELSS was added in 80C from 2005,
        This is just a general question why ELSS existed long time ago..please share tax rebate of such year where ELSS of 10k rebate was allowed.

        My age is 27 and risk appetite is above average. Yes I started direct equity as a resolution 2010. I am studying market report and investing in good stocks for long term.

        1. Vibhav Nayak says:

          Hey Guys, you are right about the inclusion under Sec 80C but earlier ELSS was present under Sec 88 which offered a 20 per cent tax rebate for investments up to Rs 10,000 with a three year lock-in period.

          1. manish says:


            Ohh .. so that 20% was a flat rebate ? tell more ?


        2. manish says:


          by diversifying in real estate its very tough right now . But in coming years (1-2 yrs) , we might have REIT and REMF products in india , through which you can still participate in real estate growth with little money .

          For now, you can invest in Real estate companies if you feel real estate can give good returns 🙂

          Regarding ELSS , yes i think just the section name was changed from 88 to 80C and limit was increated to 1 lacs from 10k . If you know more please confirm and share 🙂


  67. Nikhil Shah says:

    Dear Manish,

    Nice Article..

    I think you should publish Today’s Education Expenses of Various Leading Colleges & IIT Universities..Then Put Inflation Figure in ( % )….If you want I will provide…

    I have also made Child Planner ( For My Son ) in PDF Format..If you send your E-mail ID…

    Pl note my E-mail ID :

    Keep it up
    Nikhil Shah
    .-= Nikhil Shah´s last undefined ..If you register your site for free at =-.

    1. manish says:


      Please send it to me on mail 🙂


    2. vivek says:

      nikhil can u send me the child planner to my id, its :

      1. aloksharma says:


        Pls send the same to me at aloksharma(at)gmail(dotcom)


  68. Anu says:

    Manish, another excellent article from you.
    Why you say Ulip is not good. I have taken ulip for elder kid’s (4 yrs old) education. It is ICICI Lifetime Super. My investment horizon is 15 yrs. I guess if ur investment horizon is 15 yrs and you are aware of the charges, then ulips are suitable.
    Also another thing what i dont understand when you say for long term equity is better. so incase i choose MF or equity, and invest around 10,000 per months (for example) and what if the the MF facevalue starts coming down after 10 or 12 yrs. I never understand this thing… so do u mean to say that after 10 yrs while re-assessing ur investment if you find out that mf value it coming down or has comedown to 50%, then u shift ur entire money to a new MF ?
    Thanks manish for your clarifications.

    1. Thanks Anu

      Regarding “ULIP is not good for long term” , This is not true , what i meant was that its not a suitable product for most of the people . You must be understanding that ULIP is nothing but “MF + switching facility” . So if you are using that switching facility from safe to risky funds and risky to safe funds and have knowledge how to do that . In that case ULIP’s can be excellent products . but incase you have just bought them and just sitting idle , then you have not done correct thing . In that case you should do plain mutual funds .

      Another thing is NAV of Mutual funds in long run, so generally in long run NAV should increase with fluctuation in short term , If you see SENSEX or NIFTY over long run , you can see it as a Mutual funds NAV , so it was small number earliar first , then it increases over long term , but there will be decrease in short term .


  69. Mukesh lakhani says:

    Thanks for your quick response , actually i am out of india since last 4 years so i have very limited options , on the religare term plan also , it is not available for NRI at this time , on the property market my thought was that market is very hyped and there is no genuine demand , all the buyers are those who have excess cash at their disposal for investment so they are buying and pushing the market up , but since last 2 years market has gone up only , so i have been proved wrong and now even i am looking for a decent investment option in property market – thought of Ahmedabad as city , some one suggested that othersie i dont have any links , what u say , whast is your outlook on gold

    1. manish says:


      the important question you have to ask is what is your return needs and expectations ? Only then you can find out the risk mix of products for yourself . There is no point in chasing 25% when you can achieve your goals in 12% . Once you do everything to acheive your 12% , then you can try extra for that 25% . I would say that if you are putting money in Equity , invest through SIP only .

      Regarding Real estate , better think of place where you are going to live for long term .

      Regarding GOLD. I am not very much excited in short term . No idea of long term view .


  70. Vipin says:

    IT takes around 2500 per month for primary education these days… fees is very high.
    for higher education like medical, pilot etc it is 10-15 lac. So need to calculate accordingly.
    This is good article on CHild Education Planning.

    1. manish says:


      Ya , these days primary education is a big concern . But in this article we are concerned about the future higher education costs as its a long term once time cost . School fees is a regular cost and we need to have a different planning for that .


  71. Chandoo says:

    Very good article, As a new dad of twins, I am looking for options to save for the future of my little ones. I have started few SIPs so that there is enough money. But now I know exactly what it takes to have a bright future for them. Thanks.
    .-= Chandoo´s last blog ..Excel Links – What are your plans for 2010 Edition =-.

    1. manish says:

      Chandoo , Congrats for twins 🙂

      What are the Funds you have used ? Does it allign properly with your risk appetite ? Are they equity diversified or sectoral ? Just concerned that the funds are suitable and not just great funds 🙂


      1. Chandoo says:

        I have been investing thru SIP route since I got my job in 2006. I have been using valueresearch rating (4 or 5 stars) and investing in equity diversified funds all along. I follow the good advice from people like you and have taken enough insurance cover last year.

        The funds I am investing now are,

        Let me know if you have some ideas .. I would love to hear.
        .-= Chandoo´s last blog ..Excel Links – What are your plans for 2010 Edition =-.

        1. manish says:

          All are good funds . As per your age these are suitable funds . Not sure about your risk appetite 🙂 .

          Just make sure you also use other tools like ETF’s , Gold ETF’s , debt funds , PPF etc . Do you have plans for it ?

          Chandoo , How do you track all these things ? hehe .. I am sure you are using Excel 🙂


  72. Marshal says:

    excellent man, it is really an eye opener… i liked your calculation…. we can certainly revise inflation and expected returns to suit owns need…..

    1. manish says:

      Hi Marshal

      Like you said, over time we will have to see if inflation and expected return changes .Do you think 6-7% inflation is not a good measure ? What are your favorite products you want to use ?


      1. marshal says:

        hi manish,

        Am taking 7% avg inflation and contemplating ELSS and ppf in ratio of 80;20


        1. manish says:

          Very smart

          You have using the funda of using “tax products” for long term goals . Why dont u use some part in ETF’s ? You dont like golf ETF’s ?

          75:15:10 in ELSS , GOLD and PPF can also be a good option . What do you say ?


          1. Marshal says:

            Hi manish,

            I think at this moment gold is expensive in comparison to equities. I may churn portfolio in next cycle.
            my funda is to buy cheap products that has some intrinsic value..

            what say?


            1. manish says:

              Well .. If you are ready to time the market and have interest in it . I would encourage to take decisions of buying and selling based on timing the market 🙂

              You are a value investor . Thats good . Do you study GOLD ? What are the factors when you say that Gold is expensive today ?


            2. Marshal says:

              Hi Manish,

              yes i do have a little interest in market but not as a trader but as a investor(long term 3-5yrs horizon, MF and direct equities)….

              with respect to gold, i don’t understand this product… what is the factor that will trigger growth in gold…this is what am not able to understand, so not going in this way..Why i said expensive, because too many buyers(individual, govt, banks, etc)…

              what you say?


            3. manish says:


              you have interest , but what about knowledge and expertise ? are your beating MF returns ? If not then it will make sense to take MF route .

              Regarding gold , its a complex thing ,Dont look for it as primary investment option . not more than 10% . In the last 5-6 yrs it has given spectacular returns which might not happen in future .

              What do you think ? Do you invest in Gold ETF ?


            4. marshal says:

              hi manish,
              That’s a very good point to benchmark equities returns with mf, I haven’t done so far yet but I think it will be same.

              No I haven’t invested in gold ETF, but yes physical gold by virtue of marriage and other occasions, and I think that way you can keep ur spouse happy 🙂


            5. manish says:


              Better you see if you are able to beat MF or not ? Otherwise what is the point of hard work ?

              You are right about Physical gold . but if its just for value appreciation then anything other than Gold etf’s is not optimal

              Doubts ..

              1. Did you put money in Gold bar/coin or jewellery ?
              2. By how much are you beating the MF ? Why not use ETF’s ?


  73. Very early for me reading this article but i did 😛 … It helps you also take a general idea about investing… and Yes,.. Start early and i like thsi… “Dont buy if you dont understand it” 🙂
    .-= Amandeep Singh´s last blog ..How are the Interest- free days calculated for my credit card? =-.

    1. manish says:

      Amandeep . Its better that you read this early . The amount of money you have to invest right now will be 50% of what it will be after 6-7 yrs . So better start early .

      Are you are into Direct investing yourself . Do you think its a good idea of using direct stocks for this ?


  74. srinivasu says:

    dear all,
    child ulips are only marketing material only.
    kindly remember that any child(minor) canot enter into any contract like life insurance.
    life cover is for parents only, who can pay the premiums.
    cash flows required for education, marriage etc.. can be mey only through investing in good places like mutual funds, gold, front line equity stocks only…
    donot fall in ulip trap.

    1. manish says:


      I agree with your points that one should use Mutual funds , gold etc for planning child education . however ULIP’s are not that bad as you have mentioned . Just that they are unsuitable for most of the people . Why do you say that “kindly remember that any child(minor) canot enter into any contract like life insurance” .


      1. srinivasu says:

        kindly recall no minor (child) can enter into any legal contract like life insurance because as par indian contract act only a major s sign. is valid.
        thanks for this service,
        p.s ULIP are complex and needs some smart work before closing any deal.
        life insurance agent/ advisors un biased views are required which in my personal view is some what difficult.
        agents like MYSELF changed companies whenever my boss jumped or better incentives offered by other rivals.
        a pure term plan is always easy and low priced.

        1. manish says:


          Ok , But a minor can have the policy through a guardian , so indirectly they can enter, thats what I meant .

  75. Mukesh Lakhani says:

    thanks for this informative article , actually i have a kid 2 yrs old now, i was looking around for this kind of advice on your blog for some time , i have recently started reading Jago investor and now became a fan of your writing , one small query … when u advise to invest in equity market over such a long period in a systematic way , my only worry is over the period the equity exposure will be so huge that it raises a concern in one mind as to so much exposure in equity is correct or not , as for eg i have used your calculator to arrive at monthly contribution , which comes to Rs 14000 , now if i take a MF SIP where i invest rs 14000 every month for 18 years , then i am looking for face value of Rs 31lakhs by end of 18 years , which is a sizeable amount , only risk is ,can i manage such a huge exposure in equity market , if god forbids anything goes wrong in market or with MF company , then what ….Will one will be able to manage this over 18 years period.. so some times i feel that the plans offered by insurance companies are safe as they will manage and have a guaranted amount linked with and my kid will be nominee there, so if something happens to me he will get the benefit .. just a thought not sure if i am thinking in right direction .. kindly advise

    1. manish says:


      Your concern is very thoughtful , it shows that you are really thinking it in detail 🙂 . Good job . If you read “Important Points to remember” dicussed at the end of article . You can see that I talked about “Asset allocation” and gave a link to article : .

      If you read that carefully you will understand that

      1. You have to do your Portfolio rebalancing every year atleast so that once your equity exposure increase than what you are comfortable with , it automatically gets adjusted . Its very important .

      2. You have to find out what is your risk appetite and then decide our equity allocation .

      When you goal comes near , then you start shifting from equity to debt . Which will happen anyways because over time your asset allocation will change (high debt and lower equity) and rebalancing every year will make sure you are on right track .

      If you visualize the flow of how things will happen , you will realise that we have a strong structure 🙂 and the chances of failing is very very less 🙂

      Let me know if you understood things or not . If there are any doubts , feel free to let me know . No issues with answering more of doubts . Good luck .

      Also let me know what are your views on investing in ETF’s and real estate .

  76. Vikram Pattabiraman says:

    Thanks Manish for such a wonderful article…What is the best ULIP for wealth creation/investment purposes with minimal charges ? Both for self/spouse and for child


    1. manish says:


      Thanks , If you need the best ULIP , you should look at IRR of ULIP . More the IRR , better then ULIP returns . From IRR point , Aegon Religare ULIP has the highest IRR . Just 5% as allocation charges .

      Why do you feel ULIP is right product for you ? are you not comfortable with Term plan + MF , PPF + ETF option ?

      Do you have good understanding of Market movements so that you can utilize Switching facility ?


      1. Vikram Pattabiraman says:

        Hello Manish,
        Thanks for your reply. I was looking at the religare invest maximizer ulip suggested. It definitely has the highest IRR of 8.5% (assuming 10% returns). Could you please have a look at the Reliance Life Premier Term 10 plan. If you go through an agent it is 6% premium allocation and if you go directly to their office it is 3% premium allocation. No other premium allocation charges. With the other charges and 6% premium allocation, the irr came about 8.35%. It should be greater or close to 8.5% when 3% premium allocation is factored in. The best thing is 8 mutual funds all the way from money market to sector infrastructure. The religare had only 3. The performance of the reliance funds is much better than the religare funds atleast from the data I have seen. Can you have a look and suggest whether to go for it or not…I understand your argument about MF+Term Plan. I like it as well. I am thinking of starting this ULIP on my wife’s name and then 6 months down the road start my Term plan…I am an US based NRI, 29 years old and my wife is 22. I have been following your blog regularly…Too bad they dont offer iTerm for non residents…

        1. manish says:


          Its too tough for me to look at individual plans . You should review it using the education i have provided on this blog . It would be better than you get the ULIP with least allocation charges . The IRR of 8.5% is great . go for it .

          Where did you find the IRR information from ?


          1. Vikram Pattabiraman says:

            The religare IRR for Invest Max Plan of 8.5% was listed on Outlook Money.

            In my quest to find the cheapest and best value ULIP plan, I have been doing a lot of reading for the past 2 days now ever since you introduced me to the religare offering.When going through the religare news articles, in sep 2009, religare claimed they had the ULIP with the highest IRR and a cash award of Rs 1000 for anyone finding a better ULIP plan i.e one with a higher IRR. Now that offer does not exist anymore when I spoke to a rep.

            This made me think…Can any other plan beat the 8.5% IRR benchmark set by religare… The following is the result of my investigation. I have learnt quite a bit on the quirks of the charges. The service tax component seems to be draining quite a bit. I didnt see any website complain about that…Thanks Mr Chidambaram.

            The Reliance IRR is from their website via the benefit illustrator.

            Unlike many other plans, the IRR for the plan sticks to 8.51 irrespective of number of years.
            This I believe can be of great importance to investors.

            For Time Periods => 15 years – Use Reliance Life Premier Basic Plan
            = 10 years – Use Reliance Life Premier Term 10 plan
            Go direct to the reliance office -> 3% premium alloc and that’s it for all the years
            If you use a marketing/sales exec -> it is 6% for the 1st year and that’s it
            So fill up the form and go to the reliance office for savings of 3%.

            With 6% -> The IRR = 8.51%
            With 3% -> IRR is roughly about 8.6% (my own calc using benefit illustrator example)

            Also monthly maintenance is fixed at Rs 40 for ALL years. Fund charge not to cross 1.35%. Most of them are at 1.25% currently.

            Manish, it might be good if you can write an article on this fund and compare it to the religare plan. It might be of great benefit for the readers. Just a thought.

            The ability to switch between debt,cash and equity is of primordial importance. It will give great returns if timed very well especially while India is going through the transition from developing to developed economy. It will be volatile as hell.

            You could use the reliance plan for retirement, child education what not…The mortality rate for infants/children will be very low so almost negligible comparing the returns.

            The other benefit is less paperwork and keeping track of investments if everything can be accessed from one place.

            The best of all 8 super funds from one of the best mutual fund houses in the market today. 52 switches between funds a year online and premium redirection by writing to reliance (painful).

            Another tip is to redirect all the premium to a money market or “cash” like fund. Then switch as you please once a week. This will eliminate writing to reliance to change the premium redirects. Same with top-ups.

            In this case of low premium allocation + top-ups , it might be better to have high premiums and and no top-ups as premium allocation charge ends after the 1st year (one time 3%). Top-ups charge 1% premium allocation charge…so having higher premiums will help offset the 1% charge except when you get say a big bonus at work and want to invest…

            Hope this information helps someone…

            Thanks again for the excellent blog Manish…


            1. manish says:


              Wow .. I am amazed by seeing your detailed and long reply . I have 2 points

              1. Apart from IRR , what is the fund performance ? How old is the ULIP ? If its just 1-2 yrs . Wait !! , We cant marry a girlfriend whom we know from 1 week !! .

              2. I guess you have detailed review of the product . Why dont you draft it in a clean way with points . I will post it on your behalf as guest post ?

              What do you say ?


            2. Vikram Pattabiraman says:

              Hello Manish,

              It will be a real great pleasure to write in your blog…Anything that will help my fellow countrymen…I will get into the research of mutual funds offered in the ULIP next..Will call them up and see if I can find who the fund manager is and their track record even if the funds themselves dont have track records. The ULIP space is very new, so it is very difficult to get comparisons on fund performances. Reliance Mutual Fund is one of the best fund houses in the market and the choice offered is awesome…
              2 things that will help me in this endeavor…(a) I know you had put together a spreadsheet to calculate IRR, if you can e-mail that to me, I can manually work out the numbers and verify the findings of Outlook Money/Reliance Websites. It is good to be an investigative journalist, you know :)… The google spreadsheet version doesn’t work! (b) My e-mail is Can you send me your e-mail, so that I can send you the draft once my investigation is complete..Since it is going to be my first post, I want to include all the details and strategies I can gather…i will get you the draft this weekend…Thanks! Quite excited abt the whole thing now!!

            3. manish says:


              I have mailed you . Thanks for your interest .


            4. srinivasu says:

              wellsaid !
              true, thanks for this service.

            5. srinivasu says:

              dear all,
              the company in the news is a recent entry to the market.
              their fund performance is yet to be proved above bench mark wait before signing a new one.

  77. Mohan says:

    I think it is too early for me to plan on this. Thanks for putting up a nice article. Will track back on this when required in future 🙂
    .-= Mohan´s last blog ..Indiblogger Meet @ Bangalore =-.

    1. manish says:

      Why Mohan ?

      Why its too early ? Even if you are not married or planning for kid , you always have a rough idea when things are going to happen . The earliar you start . it would be good 🙂 .

      So Mohan , do you think Unit Linked plans should be used here ? If yes , why ?

      Do you think 7% is good assumption for inflation and 10% for education cost ? What do you feel ?


  78. Jagbir says:

    Thanks manish for such an helpful article. I think advance planning for child education and marriage as well is a crucial one to avoid stress in future and being trapped in unwanted situation where we have to take loans or borrow money to cover expenses. Its much more comfortable to set aside a small amount of money every month from now onwards than looking into the sky in future and praying to God for help 🙂
    .-= Jagbir´s last blog ..Setting up mutiple MySQL Database servers on a single linux machine =-.

    1. manish says:

      Amazing point !! .

      Thats what financial planning means ,. Its all about “prepardness” . However small you save will help , we have to be ready for all the goals and Child education is so critical . What numbers are you taking for inflation and return expectations ?

      What are the idea products as per your understanding to invest for Child Education ? Please share


      1. srinivasu says:

        i am a believer in front line diversified equity stocks like L^T, bhel, ongc,hul,itc, powergrid, ntpc, RIL,sbi, icici bank, dr. reddy labs, lupin etc..
        children have no earning power so fathers money is childs…
        do not forget to teach kids good spending/savings habbits from early dates…
        any how thanks manish for your good work.

        1. jagbir says:

          Srinivasu, I’m also in the same line. Having a concentrated good portfolio is all what I have. I hope it will serve all my purposes 🙂


        2. Thanks for the compliment . I suggest keep doing what you are good at 🙂


  79. Shantharam says:


    Great article to enlighten all of us.. I was knowing this but was calculating the future value by taking the rise in education costs as just 7% ( the normal inflation rate we assume) . I feel, i will now have to recalculate and see which products i should invest in.


    1. manish says:

      Nice . thats one common mistake done by everyone . We compund everything with common inflation . Its different for different things like Health Cost , Education costs etc .

      So a good inflation for education cost would be 10% . So Shantharam , what investment products are you using for Child education ? Would love to hear your understanding on how we should take care of investments for Children education ? Are you using pure equity products ? Your comments ..


      1. Shantharam says:

        With this education rise at 10%, i have arrived at a mind boggling figure for my child’s education 15 years from now.

        Intially, i had thought of a mix of equity and debt in the ratio 75:25. But now, i feel i should increase my equity ratio to 90% as the corpus required now is much higher .

        I feel now i should go for Tax Saving MFs and PPF in the ratio 90:10. Generally speaking, we can go for even 100% on equity MFs as normally the requirement for child education is made atleast 15 years in advance.

        In my case, i am opting for 10% in PPF just as a cushion to the equity shocks 🙂


        1. manish says:


          What is your age ? What is the current figure for education you have taken, I would say take realistic figures . Some times you might end up taking some extra amount for “Worst case” . I understand that that is a good thing, but not always . If it takes 5 lacs for higher education today , then take 5 lacs only , not 10 lacs . that 5 lacs extra might look small right now . But then the same future value will be double 🙂 which is not a good thing .

          So just make sure you have taken the right numbers . What is the saving you need to do per month as percentage of your salary ? is it more than 15% ?


          1. Nitin says:


            I took the most expensive education as of my knowledge in india which is ISB. I have information that is is 20 L-25L for full course (2 years).

            If i see this figure and i want best possible education for my kid, then i have to calculate based on that figure. I/he can go for education loan that point of time but lets target for this figure and let see if we can acheive.

            Thought i will not force him to go for MBA (He is just 18 months now), he can do what ever he want.. but to set goal i have to choose the best possible thing present in the market… 🙂


            1. manish says:

              Yes Nitin

              As a parent , you will plan for him as per the market best course . I say “best course” , because “best education” is not “best course” . A person’s best Education is what make him feel like doing it .

              So I would say you can think about ISB . However I would say that you do with an average fees like 4-5 lacs, otherwise it can put lot of pressure .

              What do you feel ?


            2. Nitin says:

              Fully agree with you, Best course is not always best education. Ideally one should always look and try for best education.

            3. manish says:


              Why do you want your child to go for MBA ? I am asking this because you had MBA in mind ? Are you an MBA yourself ? If yes , I am amazed how can your be cruel 🙂 hehe .


            4. Nitin says:

              Nope , i am not having any MBA degree… 🙂 m in software field. And i am sure and certain that i will not allow him to go in this service indutsry software field ….:)

              As I said was just taking the best available education cost for my calculation… nothing else….And again it is up to my son what he want to become in his life….. no pressure from my side… 🙂

            5. manish says:

              very nice 🙂

              i can understand why you dont want him to go to software .


            6. Raj says:

              You are taking an extreme example. ISB is costly because the high salary after the course makes up for it. People take study loans to complete ISB course. Hardly anyone would do it with parent’s capital.

              So I believe you should calculate with normal education today (4-5lacs is good enough, but you can take more.)

            7. Raj

              You can take your own figures, the focus is on procedure !

    2. srinivasu says:

      Financial goals are important but it must be always REALISTIC No one knows which sector will be booming in future,so having enough money can keep you prepared for any task.
      I personally believe only child can understand his/her may not be wise to think the education costs will go up in future also.
      TECH. changes may lower costs like present electronic items.
      in the long run equity and real estate will give good returns.
      thanks for this service
      p.s never forget to invest on your self.proffessional development in your own carrier or business gives you happiness and preparedness for any event.

      1. I agree with your last line : never forget to invest on your self.proffessional development in your own carrier or business gives you happiness and preparedness for any event


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