How Can I Afford To Send My Child to College? (continued)
Topics: College Financial Planning, Teen Years (13-19), Ninth Grade
Amount You Would Need to Save to Have $10,000 AvailableWhen Your Child Begins College |
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| Amount Available When Child Begins College | |||||
| If you start saving when your child is | Number of years of saving | Approximate monthly savings | Principal | Interest earned | Total savings |
| (Assuming a 5 percent interest rate.) | |||||
| Newborn | 18 | $29 | $6,160 | $3,840 | $10,000 |
| Age 4 | 14 | 41 | 6,896 | 3,104 | 10,000 |
| Age 8 | 10 | 64 | 7,696 | 2,304 | 10,000 |
| Age 12 | 6 | 119 | 8,561 | 1,439 | 10,000 |
| Age 16 | 2 | 395 | 9,490 | 510 | 10,000 |
To calculate how regular contributions will grow due to compound interest in your specific accounts or investment funds, check out FinAid.org's Savings Growth Projector at www.finaid.org/calculators/savingsgrowth.phtml
When deciding which type of savings or investment is right for you and your family, you should consider four features:
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Risk: The danger that the money you set aside could be worth less in the future.
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Return: The amount of money you earn on the savings instrument or investment through interest or dividends.
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Liquidity: How quickly you can gain access to the money in the instrument or investment.
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Time Frame: The number of years you will need to save or invest.
When you select one or more savings instruments or investments, you should balance these factors by minimizing the risk while maximizing the return on your money. You will also want to be sure that you will be able to access the money at the time you need to pay for your child's education.
If you start early enough, you may feel confident about making some long-term investments. Some investments are riskier than others but can help you earn more money over time. Chart 10 lists some of the major kinds of savings instruments and investments that you may want to use. You can get more information on these and other savings instruments at local banks and at your neighborhood library.
Don't forget that you won't necessarily have to save for the entire cost of college. The following section tells about student financial aid for which you and your child might qualify and other ways to keep college costs down.
Financial Aid
Financial aid can help many families meet college costs. Every year millions of students apply for and receive financial aid. In fact, almost one-half of all students who go on for more education after high school receive financial aid of some kind.
There are three main types of financial assistance available to qualified students at the college level:
Reprinted with the permission of the U.S. Department of Education.
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