This tool calculates how much one needs to save annually (or in a lump sum) to pay for a series of education costs. It may be used for private grade and high schools, as well as for college. Use this calculator as a starting point to discuss a strategy that will cover projected education expenses. Simply enter your client's assumptions to calculate the annual beginning of year contribution requirement. Once calculated there will also be an additional option to calculate the lump sum requirement. Student annual education amount is entered in today's dollars (current cost) and will be inflated at the individually specified education inflation factor (which is most often much higher than the normal rate of inflation). |
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Assumptions: This calculator uses the following simplifying assumptions: •The education fund grows and is distributed tax-free. •The contributions and withdrawals to/from the education fund are made at the beginning of each year. •The "education cost" is used in a broad sense by this tool. In this context, it may include board, books, entertainment, etc. as well as the fees charged by the school. Description of the Worksheet: This solution is found using iteration to solve for the required cash flows within the following worksheet. (The following outline assumes one student. Columns for additional students are inserted between columns three and four of this outline). Column one is the beginning of year calendar year. Column two is the age of the student. Column three is annual education cash flow requirement for the student. Column four is the total annual education costs for all students. Column five is the annual beginning of year fund contribution requirement. Column six is the net beginning of year balance. Calculated as: •Previous End of Year Balance + Fund Contribution - Total Annual Education Costs Column seven is the annual growth of the education fund. Calculated as: •Beginning of Year Balance * Net Fund Rate of Return Column eight contains the end of year balance. Calculated as: •Beginning of Year Balance + Annual Growth |