| College is just about one of the most important | | | | a specific school that costs around $12,000 a year |
| expenses you will ever incur throughout your entire life. | | | | today. Basically were looking at around 10 years left |
| Besides buying your home, it could very well be the | | | | for you to start saving. |
| most expensive thing you ever pay for. And the prices | | | | How much is that $12,000 a year college going to cost |
| just keep climbing! Even with careful planning and | | | | by the time your daughter is old enough to attend? |
| long-term savings. The cost of a college education is | | | | Let's assume inflation is running around 5% a year. For |
| becoming unaffordable for a large part of society. | | | | the most part colleges tend to increase their prices at |
| Which means that it is more important than ever to | | | | the nominal rate of inflation. |
| calculate the true cost of a college education and start | | | | Also to clarify, let's say that that $12,000 will cover |
| saving as soon as is humanly possible. In this article, I'm | | | | everything including tuition, room and board, books, and |
| going to talk about the cost of a college education and | | | | all other incidental expenses. Calculating for inflation, |
| give you some tips on how to plan accordingly. | | | | you will need just over $80,000 to pay for four years |
| The first thing to note is time. It is incredibly important to | | | | of college at the current growth rate of 5% per year. |
| plan for education savings as early as possible. It's not | | | | Luckily you won't need $80,000, because you have 10 |
| ever to soon to start planning. As soon as your | | | | years to invest during which time your investment can |
| children are born you should put a plan in place. If you | | | | earn interest which compounds on top of more |
| didn't start that soon, don't worry; you can still play | | | | interest, and that's the name of the game. Assuming |
| catch-up but you need to get started right away. | | | | that your investments increase at 8% per year, and |
| Next it's important to be realistic about the cost of | | | | they increases tax-free... you can expect to invest |
| college. These days, even state schools could run | | | | around $36,000 over the next 10 years in order to |
| close to 10 or $12,000 a year! Elite private colleges are | | | | meet the $80,000 fee. |
| nearing $50,000 a year or more as of 2010. Harvard, | | | | Check with the financial aid office of the college that |
| for instance, cost around $37,000 a year in tuition | | | | you have your eye on. Quite often they will have |
| alone. That doesn't count room and board, textbooks, | | | | investment worksheets that you can print out that will |
| and other incidental expenses. When you add up all of | | | | help walk you through the costs involved and show |
| those things the price shoots to nearly $60,000 per | | | | you how much you need to invest before hand at |
| year! | | | | different interest rates, over different time periods, in |
| Let's create a quick example. Imagine that you have | | | | order to finance your children's education. And no |
| an eight-year-old daughter and you want her to go to | | | | matter what, the earlier you start the better. |