Retirement Planning by One-time Investment: How Rs 4,00,000 lump sum deposit on your child's 18th birthday may create 4.67 crore corpus by their retirement

If one starts investing early in their life, they get more years for compound growth of their investments. Even if they begin their journey from a small amount, they can create a sizeable fund in the long run. E.g., if a person invests Rs 3,00,000 at the time of their child's birth and let the investment grow for 30 years and gets a 12 per cent annualised return, look at how large a corpus they may create from it. 

In 30 years, estimated capital gains will be Rs 86,87,977, the estimated corpus will be Rs 89,87,977.  Here, we can see that the growth is nearly 30X. 

Let's put it another way. A father decides to start a Rs 15,000 monthly SIP investment at the birth of their child and aims to continue it till their child turns 21. At that stage, they want to redeem their investment and use the amount for the child's higher education. Let's see how much they may get at that time.

In 21 years, estimated capital gains at a 12 per cent annualised return will be Rs 37,80,000, estimated capital gains will be Rs 1,18,65,101, and the estimated corpus will be Rs 1,56,45,101.

Now, a father decides to make a one-time investment of Rs 5,00,000 when their child turns 18. They want their child to redeem this amount at 50 years of age and use it as a retirement corpus. Let's see that at a 12 per cent annualised return, how much it can grow.

In 32 years, estimated capital gains will be Rs 1,82,90,863, and the estimated corpus will be Rs 1,87,90,863. You can see that the corpus grew by over 37 times.  

A father decides to start a Rs 10,000 monthly SIP investment when their child is born. They expect their child to get married at 25 years of age. They expect a 12 per cent annualised return on their investment. Let's see how large a corpus they may generate during those 25 years. In 25 years, the total investment will be Rs 30,00,000, estimated capital gains will be Rs 1,40,22,066, and the estimated corpus will be Rs 1,70,22,066. 

When you create a corpus, you need to pay a tax on that, and inflation reduces its value. But the thing is, one needs to start from somewhere. The earlier, the better. If they start early and build a large corpus, even the taxation part and inflation will not affect financial goals.

In our story, we will show how a one-time investment of Rs 4,00,000 made on the 18th birthday of a teen can help build an estimated corpus of Rs 4.67 crore by the time they turn 60. We will also highlight investment growth every 10 years to underline the importance of the power of compounding in long-term investment. 

The investment horizon in such a case is 42 years, and the annualised rate of return for investment will be 12 per cent. 

In 10 years, estimated capital gains will be Rs 8,42,339, and the estimated corpus will be Rs 12,42,339.

In 20 years, estimated capital gains will be Rs 34,58,517, and the estimated corpus will be Rs 38,58,517.

In 30 years, estimated capital gains will be Rs 1,15,83,969, and the estimated corpus will be Rs 1,19,83,969.

In 40 years, estimated capital gains will be Rs 3,68,20,388, and the estimated corpus will be Rs 3,72,20,388.

In 42 years, estimated capital gains will be Rs 4,62,89,254.93, and the estimated corpus will be Rs 4,66,89,254.93.