A couple of years ago, I created a college funding spreadsheet in Excel that I think is very useful. It is still a work in progress but is nearly complete. Anyway, I wanted to share with you a college funding example based on my spreadsheet.
College Funding for Baby Girl
For this example, we will assume this plan is for a 2 year-old girl who will start college the Fall semester in 2022. Here’s all the input information:
I’m assuming a public college with a current tuition of $12,500 per year. I’m also assuming that the inflation rate for tuition is 7% per year, which is steep but I figure it is better to be safe than sorry. I’m also going to assume a 10% ROR on the investment account. Some would say this is aggressive, but I think over the long run, this can be done.
So, based on those numbers, the outcome for a lump sum investment looks like this:
If the parents (or grandparents) invested $30,833 today and it grew at 10% per year, they could fully fund Baby Girl’s college education. The problem: who has $30,833? Fortunately, there’s another way to save for college: annual deposits, which looks something like this:
So, this tells you that if you invested $3,494 per year and got a 10% rate of return each year, you would have enough to fully fund Baby Girl’s tuition for four years. This example assumes that you would not want to continue funding throughout college. I like this because there’s a good chance that there will be unplanned expenses during those college years.
So, what do you think? Was this example helpful? Here’s a link to the Excel Spreadsheet that I used. If you do download the spreadsheet, ONLY input information on the INPUT sheet. Otherwise, there’s a good chance you will mess up the file. Also, the file is unusually complicated. I’m sorry about that. It allows for input of up to two children and shows the expenses of the two combined. I think it is pretty cool.