PPF: Here’s how much investment of ₹2,000 per month earns you — Even 5 years’ delay can impact your total corpus

The Public Provident Fund (PPF) is a top choice when it comes to long-term financial planning. Launched by the Centre in 1986, it is a reliable, low-risk government backed savings scheme with consistent and guaranteed returns and can be used to meet financial goals such as funding of wedding, children’s education abroad, buying a house, retirement fund or even building wealth.

A PPF account can be easily opened at any post office or bank branch across India by submitting an application form, photo and mandated KYC documents. For minors, the parent / legal guardian can open an account, which must be converted to major status once the primary account holder turns 18 years of age.

PPF tenure is 15 years (lock-in period), past which, investors can choose to extend their account in five-year blocks, indefinitely, with or without fresh contributions.

Start investing early, even a five-year delay can cost you

Most experts advise that you begin investing early and even parents can consider the instrument as a wealth builder for their child over the long-term future. This is because the age at which you begin investing at has a large impact on the total PPF corpus accumulated at time of withdrawal (usually between 50-60 years of age).

When investing for yourself or your children, beginning early has dual advantage — it gives the corpus a longer time to accumulate interest, thus making maximum benefit of compounding interest; and it allows you to significantly reduce the minimum monthly investment required to reach your target.

For example, if you begin investment from the year your child is a toddler, with long-term view of staying invested for the next 50 years, the monthly amount required to reach crorepati status can go as low as ₹1,900 per month.

Can you become a crorepati with PPF investment?

Today, we calculate how much an investment of ₹2,000 per month in your child / your own PPF can build you a corpus exceeding ₹1 crore in the long run. Below is how the calculation works out across five-year intervals, accounting for delay in starting investment over a period of 15, 20, 25, 30, 35, 40, 45 and 50 years:

• If you start investments for your child at age 5: Investment of ₹2,000 per month for 50 years at interest rate of 7.1% totals to ₹12 lakh and earns interest of more than ₹96.12 lakh, for total maturity corpus of over ₹1.08 crore at age 55.

Thus, you see that consistent and long-term investment can make you a crorepati even with simple ₹2,000 per month instalment in a government-backed savings tool.

• If you start investments for your child at age 10: Investment of ₹2,000 per month for 45 years at interest rate of 7.1% totals to ₹10.80 lakh and earns interest of more than ₹64.87 lakh, for total maturity corpus of over ₹75.67 lakh at age 55.

To make up the five-year difference, you would have to up your monthly investment amount to ₹2,900 per month for total maturity corpus of over ₹1.09 crore.

• If you start investments for your child at age 15: Investment of ₹2,000 per month for 40 years at interest rate of 7.1% totals to ₹9.60 lakh and earns interest of more than ₹43.05 lakh, for total maturity corpus of over ₹52.65 lakh at age 55.

To make up the 10-year difference, you would have to up your monthly investment amount to ₹4,200 per month for total maturity corpus of over ₹1.10 crore.

• If you start investments at age 20: Investment of ₹2,000 per month for 35 years at interest rate of 7.1% totals to ₹8.40 lakh and earns interest of more than ₹27.91 lakh, for total maturity corpus of over ₹36.31 lakh at age 55.

To make up the 15-year difference, you would have to up your monthly investment amount to ₹6,000 per month for total maturity corpus of over ₹1.08 crore.

• If you start investments at age 25: Investment of ₹2,000 per month for 30 years at interest rate of 7.1% totals to ₹7.20 lakh and earns interest of more than ₹17.52 lakh, for total maturity corpus of over ₹24.72 lakh at age 55.

To make up the 20-year difference, you would have to up your monthly investment amount to ₹8,800 per month for total maturity corpus of over ₹1.08 crore.

• If you start investments at age 30: Investment of ₹2,000 per month for 25 years at interest rate of 7.1% totals to ₹6 lakh and earns interest of more than ₹10.49 lakh, for total maturity corpus of over ₹16.49 lakh at age 55.

To make up the 25-year difference, you would have to up your monthly investment amount to ₹13,200 per month for total maturity corpus of over ₹1.08 crore.

• If you start investments at age 35: Investment of ₹2,000 per month for 20 years at interest rate of 7.1% totals to ₹4.80 lakh and earns interest of more than ₹5.85 lakh, for total maturity corpus of over ₹10.65 lakh at age 55.

To make up the 30-year difference, you would have to up your monthly investment amount to ₹21,000 per month for total maturity corpus of over ₹1.11 crore.

• If you start investments at age 40: Investment of ₹2,000 per month for 15 years at interest rate of 7.1% totals to ₹3.60 lakh and earns interest of more than ₹2.90 lakh, for total maturity corpus of over ₹6.50 lakh at age 55.

To make up the 35-year difference, you would have to up your monthly investment amount to ₹34,000 per month for total maturity corpus of over ₹1.10 crore.

Power of compounding: Invest early to reduce burden in later years

As illustrated in the above calculations, delaying your PPF investments can have a significant impact on how much you will need to invest in order to generate the same target corpus. And while reaching the “crorepati” status could be achieved by gradually increasing your investment amount, time is the biggest factor when it comes to capturing the full benefit of compounding.

Further, investing larger amounts monthly in PPF also may not be feasible, achievable or tax beneficial for most salaried individuals. Thus, to set up your child and / or yourself for success, a key factor is to start early and remain invested for the long-term to make the most of your investment.

Disclaimer: This story is for educational purposes only. We advise investors to check with certified experts before making any investment decisions.