NPS, or the National Pension System, is one of the most potent financial instruments at the disposal of every Indian citizen. It allows one to amass a really big pool of money for use at the old age of oneself, and according to a new extension, for one’s children, virtually laying the foundation of a secure financial future when one’s kids grow old.
On September 18, 2024, Union finance minister Nirmala Sitharaman rolled out the extension of the NPS enabling parents/legal guardians to invest in the scheme for securing the financial future of their children. An NPS Vatsalya calculator will tell you the fabulous corpus that one can build with moderate contributions to this account.
What is the NPS Vatsalya scheme
If you are not yet convinced about the efficacy of long-term compounding, you must check the NPS, or National Pension System. It is a voluntary contribution scheme that enables every Indian to create foundation of financial independence when they turn senior citizen. It creates a significant pool through decades of compounding, one part of which is used to pay a monthly pension and the other is handed over as a lump sum payment to the NPS contributor. The NPS Vatsalya stretches this compounding period to its limits.
How to calculate NPS Vatsalya scheme
The NPS Vatsalya calculator is available online and free. It asks the user to type in a few figures such as the child’s date of birth, contribution types (whether monthly or annual), the quantum of contribution, return on investment. Based on your inputs, the NPS Vatsalya calculator will provide the following information: total investment (from your pocket till the child turns 18), corpus at the age of 18, withdrawal options (at the age of 18) and corpus at 60.
Power of a moderate contribution
Check this amazing calculation. Assume a child is born on April 1, 2024. The parents create an NPS Vatsalya account with the birth certificate of the child and their own KYC documents. The following the calculation:
Child’s date of birth: April 1, 2024
Contribution: Rs 6,300 (Monthly)
Return on investment: 10%
NPS Vatsalya calculator will tell you
Total investment (from your pocket till the child turns 18): Rs 13,60,800
Corpus at the age of 18: Rs 37,92,027
Withdrawal options (at the age of 18): Up to ₹2.5 lakhs can be withdrawn as a lump sum, with the remainder in a pension plan.
Corpus at 60: Rs 25,23,75,331 (or Rs 25.23 crore)
Therefore, if you begin to invest Rs 6,300 a month from the first year and your child continues it till 60 – remember he/she does not have to increase it – an amount of Rs 25 crore can be built.
The compounding power of NPS Vatsalya will leave you agape, provided you are ready to tap its potential at the early age of your kid. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
