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College Funding Math – Part 4

By JLP | February 22, 2006

This is the last post in the College Funding Math series. Hopefully, by following the previous three posts, you have an idea of how to use math to figure out how to meet a goal. I also hope that you weren’t bored to death by reading these posts!

In Part III, we figured out that with a beginning balance of $3,000, Hector’s parents would need to save an additional $3,206 per year, invested to get 8% annual return, in order to meet his future college funding needs.

Now, with this post, I will show you an example of what all this looks like laid out in a spreadsheet. To conserve space, I had to abbreviate some of the titles for the columns. Here’s a listing of each title means:

Age = Beginning Age, for this example Hector is 5.
Beg. Amt. = The balance at the beginning of each year. Since we have $3,000 already saved up, that is the beginning amount for the first year. We are also assuming that the deposits are made at the beginning of the year.
Ann Dep = Annual Deposit, which is $3,206. Deposits are made at the beginning of each year.
Total = The total of the Beg. Amt and Ann Dep. columns.
Withdrawal = Amount withdrawn to pay for college.
Ending Balance = (Beg. Amt + Ann Dep – Withdrawal) x 1.08


Age

Beginning
Amount

Annual
Deposit

Total

With-
drawal

Ending
Balance

5

$3,000

$3,206

$6,206

$6,702

6

$6,702

$3,206

$9,908

$10,700

7

$10,700

$3,206

$13,906

$15,018

8

$15,018

$3,206

$18,224

$19,682

9

$19,682

$3,206

$22,887

$24,718

10

$24,718

$3,206

$27,924

$30,158

11

$30,158

$3,206

$33,364

$36,033

12

$36,033

$3,206

$39,238

$42,377

13

$42,377

$3,206

$45,583

$49,230

14

$49,230

$3,206

$52,435

$56,630

15

$56,630

$3,206

$59,836

$64,622

16

$64,622

$3,206

$67,828

$73,254

17

$73,254

$3,206

$76,460

$82,577

18

$82,577

$3,206

$85,782

-$24,513

$66,170

19

$66,170

$3,206

$69,376

-$25,739

$47,128

20

$47,128

$3,206

$52,333

-$27,026

$25,172

21

$25,172

$3,206

$28,377

-$28,377

$0

There you have it. It is pretty self-explanatory. However, if you have questions or comments about this series, please let me know and I’ll be happy to answer them.

Once again, I would like to thank the UnknownProfessor at the FinancialRounds blog for his help with the formula. It is always nice to count a professor among your friends.

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Topics: College Funding, Miscellaneous | 1 Comment »


One Response to “College Funding Math – Part 4”

  1. Gaurav Mitra Says:
    September 28th, 2009 at 12:58 am

    Why is there a difference in the Total and Ending Balance in the first few cases ?

Comments