Financing College
The Importance of Saving Early
Thinking of paying for your child's college education? Here is an example of why you need to start saving today.
Assume that the cost of attending a CSU (tuition, books, and room and board) is estimated at $18,000/year, attending a UC is $28,000/year, and attending a community college is $2,000/year. Also assume that you currently do not have any money saved for college, the inflation rate is 5% and your child will attend college for 4 years starting at age 18. As you will see, the sooner you start to save, the less money you will have to put away each month.
Example 1:
Rate of return of 6% on your investments:
Start saving at age: | 0 | 1 | 5 | 8 | 10 | 15 |
CSU | $391/month | $404/month | $471/month | $546/month | $617/month | $783/month |
UC | $608/month | $628/month | $733/month | $850/month | $960/month | $1,512/month |
CC (2 yrs college only) | $23/month | $24/month | $28/month | $34/month | $39/month | $72/month |
Example 2:
Rate of return of 7% on your investments:
Start saving at age: | 0 | 1 | 5 | 8 | 10 | 15 |
CSU | $351/month | $365/month | $437/month | $516/month | $590/month | $956/month |
UC | $546/month | $568/month | $680/month | $803/month | $918/month | $1,487/month |
CC (2 yrs college only) | $21/month | $22/month | $27/month | $32/month | $38/month | $71/month |
Example 3:
Rate of return of 8% on your investments:
Start saving at age: | 0 | 1 | 5 | 8 | 10 | 15 |
CSU | $315/month | $330/month | $405/month | $488/month | $564/month | $940/month |
UC | $489/month | $513/month | $630/month | $759/month | $878/month | $1,463/month |
CC (2 yrs college only) | $19/month | $20/month | $25/month | $30/month | $36/month | $70/month |
So as you can see from example 2, if you were going to pay for your child to go to a CSU, if you started saving when he/she were 1, you would have to put away only $365/month as opposed to if you waited until you child was 10 to start saving. Then you would have to put away $590/month, $225 more per month!
The importance of saving early cannot be reiterated enough.
If you have any questions, give us a call, and we would be happy to help you.
This example is for illustrative purposes only and does not reflect the actual return of any particular investment. There can be no guarantee that any particular yield or return will be achieved from any investment.