Power of Regular Savings – Part 2

August 4, 2011   ·   0 Comments

In the continuation of our series, this is second part of the series. For first part, click here.

Assuming present age of 25 years, life journey of a person

  • www.stockssavvy.comMarriage at the age of 27 years
  • Honeymoon at the same age of 27 years
  • First car taken at the age of 27 year
  • First Baby at the age of 30 years
  • Second baby at the age of 33 years
  • First child school admission fees at the age of 33 years(Baby’s age – 3 years)
  • Second child school admission fees at the age of 36 years(Second baby age – 3 years)
  • First child college fees at the age of 47 years (First child’s age 18 years)
  • Second College fees at the age of 50 years (Second child’s age 17 years)
  • Retirement at the age of 55 Years (surprised not to see 60 years, Retirement planning should be planned much ahead of actual retirement age)

The journey of life will change from person to person. Starting from the end see how regular saving per month can do wonders.

Assumption used for doing computation:

Interest rate slabs for regular savings taken if one invests in right instruments

For <5 years For 5-8 years For >8 years
10 % 15 % 20 %

India’s average inflation index has been 6.68% annually from 1948-2010 year.

  • Retirement Planning

Retirement age: 55 Years

Amount Required Time till retirement
4 Crore Rs. 30 Years

Money Planner

Regular Saving Time till retirement Interest Rate Maturity Amount
2,000 Rs. 30 Years 20 % 4,67,21,600 Rs.
  • Children college education

Person age : 47 years & 50 years

Today an engineering degree cost 4 lac rs. whereas same stands for doctors. Though the amount will be largely dependent on the stream he/she picks. But to be on safe side, let us say he picks a course which cost around 5 lac Rs. today.

Today Education Cost Time from now Amount Required @ years = x(say) Amount required @

25 years

5 Lac Rs. 22, 25 Years 20,73,939 Rs. 25,17,938 Rs.

Money Planner

Regular Saving Maturity Amount @ 22 years=y(say) Remaining Amount

(y-x)=z

Maturity Amount @ 25 years i.e. z @ 10% interest rate
1,000 Rs. 47,30,551 Rs. 26,56,612 Rs. 35,35,950 Rs.
  • Children school education

Person age: 33 years & 36 years (Assuming children getting in school at the age of 3 years)

Today Admission fees Time from now Amount Required @ 8 years Amount required @ 11 years
1.5 Lac Rs. 8, 11 Years 2,51,625 Rs. 3,04,495 Rs.

Money Planner

Regular Saving Time from now Maturity Amount

@ 8 years

Maturity Amount @ 25 years
1,000 Rs. 8, 11 Years 2,37,176 Rs. 4,79,633 Rs.
  • Hospitalization Charges for delivery of babies

Person age: 30 years & 33 years

Today Hospitalization charges Time from now Amount Required @ 5 years Amount required @ 8 years
50,000 Rs. 5, 8 Years 69,085Rs. 83,875 Rs.

Money Planner for 1ST Child

Regular Saving Time from now Interest Rate Maturity Amount @ 5 years
800 Rs. 5 Years 15 % 71,745 Rs.

Money Planner for 2nd Child

Regular Saving Time from now Interest Rate Maturity Amount @ 5 years
500 Rs. 8 Years 15 % 92,968 Rs.
  • Honeymoon Package

Person age: 27 years

Today Honeymoon package cost Time from now Amount Required @ 2 years
1,50,000 Rs. 2 Years 1,70,000 Rs.

Money Planner

Regular Saving Interest Rate Maturity Amount @ 2 years
6000 Rs. 10 % 1,60,000 Rs.
  • First Car

Person Age: 27 Years

Amount required: 5 Lac Rs.

Money Planner for down payment

Regular Saving Interest Rate Maturity Amount @ 2 years
6000 Rs. 10 % 1,60,000 Rs.

Rest amount can be given by taking a car loan with easy EMI option

Alternative plan of having a car at the age of 30 years

Money planner for 5 years

Regular Saving Interest Rate Maturity Amount @ 5 years
6000 Rs. 15 % 5,38,000 Rs.
  • First Home

Person Age: 35 Years

Keeping a house of 1 Crore Rs. in your wishlist

Money planner for 10 years

Regular Saving Interest Rate Maturity Amount @ 10 years
8000 Rs. 20 % 30,58,908 Rs.

That left you a home loan of 70 Lac Rs for which an whooping EMI of 67,551 rs. needs to be paid for 20 years if rate of interest are assumed to be 10 %. One may think of EMI to be too much, but there is no harm in thinking big. Who knows where one lands after 10 years.

  • Marriage Expense for Children

Assuming your parents are going to spend money for you, same logic I have applied you spending the money for your children.

Today on an average marriage expenses is around 20 lac Rs. specially for north India people where people spend quite lavishly on marriages. The money required for your children will be

Money Planner for 1ST Child

Money Required Today Time from now Money Required
20 Lac Rs. 32 Years 82,95,756 Rs.

Money Planner for 2nd Child

Money Required Today Time from now Money Required
20 Lac Rs. 35 Years 1,00,71,752 Rs.

This money can be easily paid from your Retirement Amount & need not need any further money which needs to be saved per month.

Total Regular Savings/Month in a nutshell

If one look for financial long term goals, then the money which one should save every month to reach these goals will be 5300 Rs. per month www.stockssavvy.com(Retirement Planning – 2000 Rs. , Children Education for school & college – 2000 Rs. & hospitalization Charges – 1300 Rs.)

The main challenge is to do savings for a Home, Car & Honeymoon package which comes to whopping 20,000 Rs. per month (Honeymoon Package – 6000 Rs. , First Car – 6000 Rs. & First Home – 6,000 Rs.)

The reason these saving are high as person needs a large corpus in short time. Imagine how much money would one require if one doesn’t start saving for long term goals. The late he starts, hardly it will be accomplish them.

That is the reason we advocate one should park around 6,000 Rs. in mutual funds to achieve their long term financial goals. A person who has just starting earning should take this as tax saving instrument where he can benefit from the both the things. This leads to an investment of 72,000 Rs per year. Other 48,000 Rs i.e. 4,000 Rs per month which needs to be saved for tax saving purpose can contribute towards saving towards your short term financial goals.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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