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June 17, 2000

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Earlier: Planning for your child's education

Rohit Sarin now tackles the final goal in this series.

We will restrict this analysis within the following parameters:

  • Individual will be 55 years of age when the child is to be married
  • Balanced risk appetite
  • Estimated current cost of the marriage stands at Rs 1 million
  • No existing savings specifically for the marriage
  • A 12 per cent per annum return on debt funds
  • A 20 per cent per annum return on equity funds
  • Inflation at the rate of 8 per cent
CASE I

Recommendations in the case of the 25 year-old....................

  • A recommended debt to equity ratio of 40:60. For this, a mix of debt and equity based funds should be selected.
  • Estimated current cost of marriage of Rs 1 million would inflate to a Rs 100,62,657 after 30 years.
  • Assuming that this would not be part financed by a loan, an amount of Rs 100,62,657 would have to be saved over a period of 30 years.
  • With a debt to equity mix of 40:60, the person needs to begin with a total monthly investment of Rs 843. This monthly saving/contribution would keep on increasing every year.
In figures, the complete 30-year plan translates to..............

Year Equity Fund Debt Fund Total Yearly Income Cumm. Balance
2000 1 506 337 843 10,119 786 10,904
2001 2 557 371 928 11,131 2,461 24,496
2002 3 612 408 1,020 12,244 4,537 41,276
2003 4 673 449 1,122 13,468 7,089 61,832
2004 5 741 494 1,235 14,815 10,203 86,850
2005 6 815 543 1,358 16,296 13,980 117,126
2006 7 896 598 1,494 17,926 18,539 153,591
2007 8 986 657 1,643 19,716 24,017 197,324
2008 9 1,085 723 1,808 21,696 30,573 249,593
2009 10 1,193 795 1,988 23,856 38,393 311,841
2010 11 1,312 875 2,187 26,244 47,691 385,777
2011 12 1,444 962 2,406 28,872 58,719 473,368
201213 1,588 1,058 2,646 31,752 71,766 576,887
2013 14 1,747 1,164 2,911 34,932 87,169 698,987
2014 15 1,921 1,281 3,202 38,424 105,315 842,726
2015 16 2,113 1,409 3,522 42,264 126,657 1,011,647
2016 17 2,325 1,550 3,875 46,500 151,716 1,209,863
2017 18 2,557 1,705 4,262 51,144 181,095 1,442,102
2018 19 2,813 1,875 4,688 56,256 215,492 1,713,849
2019 20 3,094 2,063 5,157 61,884 255,713 2,031,446
2020 21 3,404 2,269 5,673 68,076 302,689 2,402,211
2021 22 3,744 2,496 6,240 74,880 357,498 2,834,589
2022 23 4,118 2,746 6,864 82,368 421,379 3,338,337
2023 24 4,530 3,020 7,550 90,600 495,767 3,924,704
2024 25 4,984 3,322 8,306 99,672 582,316 4,606,691
2025 26 5,482 3,654 9,136 109,632 682,932 5,399,255
2026 27 6,030 4,020 10,050 120,600 799,815 6,319,670
2027 28 6,633 4,422 11,055 132,660 935,500 7,387,831
2028 29 7,296 4,864 12,160 145,920 1,092,908 8,626,659
2029 30 8,026 5,350 13,376 160,512 1,275,406 10,062,577

CASE II

Recommendations in the case of the 30 year-old....................

  • Recommended debt to equity ratio of 50:50. For this, a mix of debt and equity based funds should be selected.
  • Estimated current cost of higher education of Rs 1 million would inflate to Rs 68,48,475 after 25 years.
  • Since it is assumed that this would not be part financed by a loan, an amount of Rs 68,48,475 would need to be saved over a period of 25 years.
  • With a debt to equity mix of 50:50, the person needs to begin with a total monthly investment of Rs 1,360. This monthly saving/contribution would keep on increasing every year.
In figures, the complete 25-year plan translates to............


Year Equity Fund Debt Fund Total Yearly Income Cumm. Balance**
2000 1 680 680 1,360 16,317 1,213 17,530
2001 2 748 748 1,496 17,949 3,788 39,266
2002 3 823 823 1,645 19,744 6,965 65,974
2003 4 905 905 1,810 21,718 10,850 98,543
2004 5 995 995 1,991 23,890 15,571 138,004
2005 6 1,095 1,095 2,190 26,279 21,273 185,556
2006 7 1,204 1,204 2,409 28,907 28,126 242,589
2007 8 1,325 1,325 2,650 31,800 36,326 310,714
2008 9 1,458 1,458 2,915 34,980 46,100 391,794
2009 10 1,603 1,603 3,206 38,472 57,710 487,976
2010 11 1,764 1,764 3,527 42,324 71,462 601,762
2011 12 1,940 1,940 3,880 46,560 87,707 736,029
2012 13 2,134 2,134 4,267 51,204 106,849 894,082
2013 14 2,347 2,347 4,694 56,328 129,358 1,079,768
2014 15 2,582 2,582 5,164 61,968 155,773 1,297,509
2015 16 2,840 2,840 5,680 68,160 186,717 1,552,385
2016 17 3,124 3,124 6,248 74,976 222,906 1,850,267
2017 18 3,437 3,437 6,873 82,476 265,167 2,197,910
2018 19 3,780 3,780 7,560 90,720 314,449 2,603,079
2019 20 4,158 4,158 8,316 99,792 371,847 3,074,718
2020 21 4,574 4,574 9,148 109,776 438,619 3,623,113
2021 22 5,031 5,031 10,062 120,744 516,209 4,260,066
2022 23 5,535 5,535 11,069 132,828 606,280 4,999,174
2023 24 6,088 6,088 12,176 146,112 710,743 5,856,029
2024 25 6,697 6,697 13,393 160,716 831,788 6,848,533

CASE III

Recommendations in the case of the 35-year old....................

  • Recommended debt to equity ratio of 50:50. For this, a mix of debt and equity based funds should be selected.
  • Estimated current value of education of Rs 1 million would inflate to Rs 46,60,957 after 20 years.
  • Since it is assumed that this would not be part financed by a loan an amount of Rs 46,60,957 would need to be saved over a period of 20 years.
  • With a debt to equity mix of 50:50 the person needs to begin with a total monthly investment of Rs 2,061. This monthly saving/contribution would keep on increasing every year.
In figures, the complete 20-year plan translates to..............

Year Equity Fund Debt Fund Total Yearly Income Cumm. Balance
2000 1 1,031 1,031 2,061 24,735 1,838 26,573
2001 2 1,134 1,134 2,267 27,209 5,742 59,524
2002 3 1,247 1,247 2,494 29,930 10,558 100,011
2003 4 1,372 1,372 2,744 32,922 16,448 149,382
2004 5 1,509 1,509 3,018 36,215 23,605 209,202
2005 6 1,660 1,660 3,320 39,836 32,249 281,287
2006 7 1,826 1,826 3,652 43,820 42,637 367,743
2007 8 2,009 2,009 4,017 48,204 55,066 471,013
2008 9 2,209 2,209 4,418 53,016 69,882 593,911
2009 10 2,430 2,430 4,860 58,320 87,482 739,713
2010 11 2,673 2,673 5,346 64,152 108,327 912,192
2011 12 2,941 2,941 5,881 70,572 132,951 1,115,715
2012 13 3,235 3,235 6,469 77,628 161,969 1,355,313
2013 14 3,558 3,558 7,116 85,392 196,090 1,636,794
2014 15 3,914 3,914 7,828 93,936 236,132 1,966,862
2015 16 4,305 4,305 8,610 103,320 283,039 2,353,221
2016 17 4,736 4,736 9,471 113,652 337,897 2,804,771
2017 18 5,210 5,210 10,419 125,028 401,959 3,331,758
2018 19 5,730 5,730 11,460 137,520 476,666 3,945,944
2019 20 6,303 6,303 12,606 151,272 563,674 4,660,890

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