Saving for your children's education requires a long-term plan.
And, like saving for retirement, the earlier you start your plan
the better. Use this calculator to help develop or fine-tune your
education savings plan. Click the "View Report" button for a
detailed look at the results.
Definitions
Age of children
The current age of your children. This calculator is based on
your children beginning their college education at age 18. The
difference between their current age and 18 is the number of years
you have to save.
Annual tuition
The current estimated cost of one year of tuition and books.
This amount should be per child and be specific to the school they
may be interested in attending. The average published costs of
college, for the 2008-09 school year, including tuition, room and
board, books, supplies, transportation and other personal expenses,
as reported by the College Board:
U.S. Undergraduate College Costs
for 2008-09 School Year
Source: College Board's 2008 Trends in College Pricing,
www.collegeboard.com
Type
Tuition and fees
Room & Board
Total
Change from 2007-08
Public 4-Year (in-state tuition)
$6,585
$7,748
$14,333
5.7%
Public 4-Year (out-of-state tuition)
$17,452
$7,748
$25,200
5.2%
Private 4-Year
$25,143
$8,989
$34,132
5.6%
For the purposes of this calculator all expenses are assumed to
be due at the end of the year.
Room and board
The current estimated cost of one-year room and board. Like
tuition and books, this amount should be per child and specific to
the school they may be interested in attending. For the purposes of
this calculator, all expenses are assumed to be due at the end of
the year.
Education cost inflation
This is the percentage that you expect educational costs to
increase per year. Data provided by The College Board's "Trends in
College Pricing 2008" put tuition, room and board increases at
approximately 6.4% per year, for the last ten years.
Current amount
The total amount you currently have saved for your child's (or
children's) education.
Monthly contributions
The dollar amount you plan to save per month toward your
child's (or children's) education. All amounts are assumed to be
added to your account at the beginning of the month.
Rate of return
This is the annually compounded rate of return you expect from
your investments. This will also be the rate used if you end up
with a negative balance, and need to borrow money to meet your
goal. The actual rate of return is largely dependent on the type of
investments you select. From January 1970 to December 2008, the
average annual compounded rate of return for the S&P 500,
including reinvestment of dividends, was approximately 9.7%
(source: www.standardandpoors.com). During this period, the highest
12-month return was 61%, from June 1982 through June 1983. The
lowest 12-month return was -39%, which happened twice, once from
September 1973 to September 1974 and again from November 2007 to
November 2008. Savings accounts at a bank may pay as little as 1%
or less but carry significantly lower risk of loss of principal
balances.
It is important to remember that these scenarios are
hypothetical and that future rates of return can't be predicted
with certainty and that investments that pay higher rates of return
are generally subject to higher risk and volatility. The actual
rate of return on investments can vary widely over time, especially
for long-term investments. This includes the potential loss of
principal on your investment. It is not possible to invest directly
in an index and the compounded rate of return noted above does not
reflect sales charges and other fees that funds and/or investment
companies may charge.
Information and interactive calculators are made
available to you as self-help tools for your independent use and
are not intended to provide investment advice. We can not and do
not guarantee their applicability or accuracy in regards to your
individual circumstances. All examples are hypothetical and are for
illustrative purposes. We encourage you to seek personalized advice
from qualified professionals regarding all personal finance
issues.
