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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.
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Definitions
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Age of childrenThe 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 tuitionThe 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 2007-08
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 2007-08 School Year
Source: College Board's 2007 Trends in College Pricing, www.collegeboard.com
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Type
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Tuition and fees
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Room & Board
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Total
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Change from 2003-04
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Public 4-Year (in-state tuition)
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$6,585
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$7,748
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$14,333
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5.7%
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Public 4-Year (out-of-state tuition)
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$16,586
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$7,748
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$25,200
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5.2%
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Private 4-Year
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$23,745
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$8,581
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$34,132
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5.6%
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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 1933.
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 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.
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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.
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