How much money will Laura and Marty have to deposit each month, beginning one month after the baby is born and ending when she turns 18, in order to have enough saved up for their child’s education. Assume that the yield on investments is 8.2% per year, today's estimated college costs of $21,000 and it is increasing at 3% per year, and that their child will enter college when he or she turns 18 and will complete the degree in 4 years. Note that the investment yield will be about 3% lower after her daughter's admission to a college.
Annual yeild: 8.2%
Number of years until child attends college: 18
Annual college expenses in today's dollars: $21,000
College expected growth rate: 3%
Years in College: 4
College expense (Freshman): $35,851.09
College expense (Sophomore): $36,823.63
College expense (Junior) $37,928.34
College expense (Senior): $39,066.19
Total savings accumulation required for college expenses once child turns 18:
Monthly desposits required to save for the 4 years of child's college education at age 18: