In India, every second parent dreams that their child becomes a doctor. However, the cost of pursuing a medical degree (MBBS/MD) from a reputed private college (in India or abroad) is increasing rapidly. The education which currently costs ₹ 30 lakh to ₹ 50 lakh, can easily cost ₹ 1 crore or more in the next 10-12 years due to inflation.
For most middle-class families, it is almost impossible to arrange such a huge amount at the last moment. This is where mutual fund SIP (Systematic Investment Plan) comes in handy. According to data from the Association of Financial Advisors and Mutual Funds in India (AMFI), if you start investing at the right time and in the right way, you can easily build a fund of ₹1 crore with the power of compounding. Let’s do the math.
12 Year Goal: How much SIP amount is needed?
Suppose your child is 5 or 6 years old now and when he clears NEET or medical entrance exam at the age of 17 or 18, he will need ₹1 crore. This way you have full 12 years to invest.
Long-term investments in mutual funds generally yield returns of 12% per annum. Many well performing funds have given returns of up to 15% in the past.
SIP Calculator (Based on 12% Returns):
Target Fund: ₹1 crore
Investment period: 12 years
Estimated Returns: 12% per annum
Required monthly SIP: ₹31,500
Calculator Result: If you invest ₹31,500 every month through SIP for the next 12 years, your total investment will be ₹45.36 lakh. However, with 12% returns, you will get returns of ₹54.64 lakh. As a result, after 12 years you will have a total corpus of ₹1 crore. 12 Year Goal: How much should one invest every month through SIP?
Does ₹31,500 seem too much?
For many parents, it may be difficult to save ₹31,500 every month right from the start. In such cases, financial experts recommend ‘Step-up SIP’. This way, as your income increases, you can increase your investment by 10% every year. Step-up SIP Calculator (Mathematics of 10% increase every year):
If you start with ₹18,500 per month in the first year.
And this SIP amount increases only by 10% every year – i.e. ₹20,350/month in the second year, ₹22,385/month in the third year, and so on…
So, even with an average return of 12%, you will have accumulated a corpus of over ₹1 crore after 12 years.
This way, you won’t be burdened with a lot of money in the beginning, but you can still achieve your goal.
Where to invest for medical fund?
When investing for your children’s long-term goals, it is important to have the right funds in your portfolio:
Large and Mid-Cap Funds/Flexi-Cap Funds: These are considered best for the first 8-9 years as they have the potential for good returns.
Special mutual funds for children: Many asset management companies (AMCs) offer solution-oriented funds specifically designed for children’s education; These have a lock-in period of 5 years, which helps in maintaining discipline in investment.
Transferring funds as soon as the target is reached (STP): When there are only two years left to reach your target – for example, after 10th year – you should gradually transfer funds from equity mutual funds to safe debt funds or liquid funds. With this, your deposited fund of ₹ 1 crore remains safe from market fluctuations. Overall, the cost of a child’s medical education is certainly quite high, but it is not impossible with proper planning. Start small today, because the longer you keep your investments in the market, the faster your money will grow through compounding.
