If a child’s education costs ₹10 lakh today, planning for exactly ₹10 lakh many years from now may understate the amount required. Inflation changes the future cost of goods and services.
A simple illustration
If a cost of ₹10 lakh grows at an assumed 6% a year for 10 years, the future amount is approximately ₹17.9 lakh. This is an illustration, not a forecast of any particular expense.
Why this matters for investing
The investment amount required for a goal depends on at least three moving parts: the current cost, the time available and the assumed rate of inflation. The investment return assumption then determines the contribution required under the model.
The longer the time horizon, the more important it becomes to separate the goal calculation from the short-term movement of markets.
Use the Goal Planner and Inflation Calculator on the Nandita Finserv website to test different assumptions.