I am a single mother and have two sons aged 8 and 10. My annual income is Rs 8 lakh. I can save around Rs 20,000 per month. I have a fixed deposit of Rs 2 lakh and a few investments in mutual funds which will sum up to Rs 3 lakh. I want to build a corpus of Rs 80 lakh in the next 12-15 years for my children's education. I will also require some amount for my retirement. At present, I have a provident fund (PF). What else should I do? - Sumi Santosh
The key for you is to save regularly as well as increase your savings every year in tandem with the increase in your salary to make sure you save enough. You should be able to accumulate the target amount to provide for your children's education as well as have some surplus for your retirement.
At the same time your PF itself would become substantial and that would be the main corpus for your retirement. If you save Rs 2.4 lakh per annum for 15 years your principle accumulation will be Rs 36 lakh and assuming an average interest of 10%, your corpus will be Rs 76.3 lakh. If you now increase your savings every year by 5% then your accumulated wealth at the end of 15 years would be around Rs 1 crore. This means you will double your savings from Rs 20,000 per month to Rs 40,000 in the 15th year of saving. And, in case you are able to do much more in the later years, then it will add up to your cause. In case you are not able to save this amount, you can try to maximise the savings.
You should also ensure that the savings you are doing is not used for any other need. Hence, you need to provide for the said needs separately. For instance, medical emergency is one contingency you should provide for. Make sure you have a health insurance policy for all family members. And this you should have even if your company provides for health insurance though in that case for a smaller sum assured. At the same time, get yourself a life cover term insurance for Rs 50 lakh.
Monthly savings of Rs 20,000 can be invested in a combination of asset classes. You can build a corpus by starting systematic investment plans. Here you can consider hybrid and dynamic equity. Funds such as HDFC Prudence, HDFC Balanced, and Franklin Templeton India Dynamic PE Ratio FOF are good options. Also consider dynamic debt funds. Funds such as Birla Sun Life Dynamic Fund can be considered.
The views expressed are of Surya Bhatia, certified financial planner & principal consultant, Asset Managers