Financial Planning + Inflation- College Education investment: Real Rate - (BA II Plus & Excel)
This video shows how to calculate exactly how much to save TODAY to cover a child’s future education using nominal + inflation rate.
A couple wants to determine the sum of money needed today to fund their child’s education.
• The child is currently six years old.
• The child will start college at 18 and attend for 4 years.
• The current cost of college is $25,000 per year.
• The inflation rate is 5% per year.
• The couple can earn 8% on their investment.
What amount should they invest today to cover their child’s college expenses?
We explore three methods:
• Intuitive Step-by-Step Approach: Understand the impact of inflation and investment returns.
• BA II Plus Calculator Shortcut: Utilize the Cash Flow worksheet for a faster solution.
• Excel Magic: Solve the problem with the NPV function for a clear visual representation.