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Saving for College: Inflation and Investment

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Your daughter is a beginning freshman in high school. By the time she enters her freshman year in college, you would like to have savings accumulated to pay her tuition for her next four years of college. Assuming the annual tuition is paid at the beginning of the college year and you expect her freshman annual tuition to be $20,000 and to grow at an inflation rate of 4% for each of the remaining 3 years, calculate the lump sum required today (beginning high school) to achieve your investment goals (round to nearest dollar). Assume an average 8% annual yield over the entire period. Your daughter will begin college the following fall after high school graduation.

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Solution Summary

This solves a mathematical equation based on calculating the amount required for a family to save for college, based on a tuition of $20,0000 a year, inflation rate of 4% and 8% annual yield. The solution includes calculations to show work involved.

Solution provided by:
Sally Baldwin, Ed.D
Education
  • BA, University of Southern California
  • MSS, United States Sports Academy
  • Ed.D, Boise State University
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