Routing# 262275835
Begin planning for a college education
Now is always the right time to save for college
Begin planning for a college education
Now is always the right time to save for college
When you are planning your investment strategy, remember that investments that do not keep you ahead of inflation are not good investments for funding college costs. Following is a table with inflation factors that will help you determine what the cost of college will be when your child is ready to go to school. To use the table:
|
Years Until School Starts |
2% Inflation |
4% Inflation |
6% Inflation |
8% Inflation |
10% Inflation |
|---|---|---|---|---|---|
|
1 |
1.02 |
1.04 |
1.06 |
1.08 |
1.10 |
|
2 |
1.04 |
1.08 |
1.12 |
1.17 |
1.21 |
|
3 |
1.06 |
1.12 |
1.19 |
1.26 |
1.33 |
|
4 |
1.08 |
1.17 |
1.26 |
1.36 |
1.48 |
|
5 |
1.10 |
1.22 |
1.34 |
1.47 |
1.61 |
|
6 |
1.13 |
1.27 |
1.42 |
1.59 |
1.77 |
|
7 |
1.15 |
1.32 |
1.50 |
1.71 |
1.95 |
|
8 |
1.17 |
1.37 |
1.59 |
1.85 |
2.14 |
|
9 |
1.20 |
1.42 |
1.69 |
2.00 |
2.36 |
|
10 |
1.22 |
1.48 |
1.79 |
2.16 |
2.59 |
|
11 |
1.24 |
1.54 |
1.90 |
2.33 |
2.85 |
|
12 |
1.27 |
1.60 |
2.01 |
2.52 |
3.14 |
|
13 |
1.29 |
1.67 |
2.13 |
2.72 |
3.45 |
|
14 |
1.32 |
1.73 |
2.26 |
2.94 |
3.80 |
|
15 |
1.35 |
1.80 |
2.40 |
3.17 |
4.18 |
|
16 |
1.37 |
1.87 |
2.54 |
3.43 |
4.59 |
|
17 |
1.40 |
1.95 |
2.69 |
3.70 |
5.05 |
|
18 |
1.43 |
2.03 |
2.85 |
4.00 |
5.56 |
|
19 |
1.46 |
2.11 |
3.03 |
4.32 |
6.12 |
|
20 |
1.49 |
2.19 |
3.21 |
4.66 |
6.73 |
|
21 |
1.52 |
2.28 |
3.40 |
5.03 |
7.40 |
Suppose you've decided on a public school at a cost of $20,000 in today's dollars. You assume college costs will increase by 6% per year. Your child is ten years old, so school is eight years away. Go to the 6% Inflation column, follow it down to the row for 8 Years Until School Starts. The factor is 1.59. Multiply the cost of school in today's dollars ($20,000) times the factor (1.59) to get the expected cost of school eight years from now, which in this example is $31,800.
Now suppose that same child plans to transfer from a public school to a private school (at a cost of $40,000 in today's dollars) for their junior and senior years. Go to the 6% Inflation column, follow it down to the row for 10 Years Until School Starts—that's when the junior year begins. The factor is 1.79.
Multiply the cost of school ($40,000) times the factor (1.79) to get the expected cost of school ten years from now, which in this example is $71,600.
The total cost of the four years is $213,200 as follows:
|
Today's Cost |
Times |
Inflation Factor |
Equals |
Future Cost |
|---|---|---|---|---|
|
$20,000 |
X |
1.59 |
= |
$31,800 |
|
$20,000 |
X |
1.59 |
= |
$33,800 |
|
$40,000 |
X |
1.79 |
= |
$71,600 |
|
$40,000 |
X |
1.90 |
= |
$76,000 |
|
Total |
|
|
|
$76,000 |
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