College Funding Math - Part IV

This is the last post in the College Funding Math series. Hopefully, by following the previous three posts, you have an idea of how to use math to figure out how to meet a goal. I also hope that you weren't bored to death by reading these posts!

In Part III, we figured out that with a beginning balance of $3,000, Hector's parents would need to save an additional $3,206 per year, invested to get 8% annual return, in order to meet his future college funding needs.

Now, with this post, I will show you an example of what all this looks like laid out in a spreadsheet. To conserve space, I had to abbreviate some of the titles for the columns. Here's a listing of each title means:

Age = Beginning Age, for this example Hector is 5.
Beg. Amt. = The balance at the beginning of each year. Since we have $3,000 already saved up, that is the beginning amount for the first year. We are also assuming that the deposits are made at the beginning of the year.
Ann Dep = Annual Deposit, which is $3,206. Deposits are made at the beginning of each year.
Total = The total of the Beg. Amt and Ann Dep. columns.
Withdrawal = Amount withdrawn to pay for college.
Ending Balance = (Beg. Amt + Ann Dep - Withdrawal) x 1.08

      Beg.    Ann            With-   Ending
Age   Amt.    Dep   Total   drawal   Balance
  5   3,000  3,206   6,206            $6,702
  6   6,702  3,206   9,908           $10,700
  7  10,700  3,206  13,906           $15,018
  8  15,018  3,206  18,224           $19,682
  9  19,682  3,206  22,887           $24,718
 10  24,718  3,206  27,924           $30,158
 11  30,158  3,206  33,364           $36,033
 12  36,033  3,206  39,238           $42,377
 13  42,377  3,206  45,583           $49,230
 14  49,230  3,206  52,435           $56,630
 15  56,630  3,206  59,836           $64,622
 16  64,622  3,206  67,828           $73,254
 17  73,254  3,206  76,460           $82,577
 18  82,577  3,206  85,782  $24,513  $66,170
 19  66,170  3,206  69,376  $25,739  $47,128
 20  47,128  3,206  50,333  $27,026  $25,172
 21  25,172  3,206  28,377  $28,377       $0

There you have it. It is pretty self-explanatory. However, if you have questions or comments about this series, please let me know and I'll be happy to answer them.

Once again, I would like to thank the UnknownProfessor at the FinancialRounds blog for his help with the formula. It is always nice to count a professor among your friends.

Tags: Saving for College, College Funding, Time Value of Money, Annuity Due Formula, College Funding Math, Planning for College