You are going to be a new parent in approximately 6 months. You want to start saving money toward your child’s college education, but don’t know what or how much to invest therefore you decide to do a little research in this area.
Make a list of at least three types of investment opportunities [i.e. savings accounts, CD’s, bonds, etc.] and what interest rate or return you can get on the investment.
- You decide to save enough for 2 years of community college and 2 years of university. Choose the two higher education institutes and calculate the cost of tuition, books, and living expenses at today’s rates (PV). Project those expenses 18 years into the future (FV). The inflation rate you use will depend on where you think you’ll be living. How much money per month will you have to save to pay for your child’s education? Choose the best investment opportunity from #1.
- At the age of 10, you find out your child is a genius and has been offered early admittance to Harvard when the child graduates high school at 14 years old. Harvard also offers a scholarship that will pay 50% of the tuition for 4 years. Re-calculate the expenses for tuition, books, and living expenses [dorm]. How much more money will you need? How much will you need to save each month? At 14 years, will your initial investment be enough for the first year at Harvard?