For a tuition of 20,000 now, how much will i need to save if my child is 5yrs now and will go to college for 4 yrs in the 13 yrs?
To determine how much you will need to save for your child's college tuition, you'll need to consider the future value of money. In this case, you need to calculate the amount that will grow from $20,000 over a period of 13 years.
To calculate the future value, you'll need to know the expected rate of return on your savings. Assuming an annual interest rate, we can use the compound interest formula to calculate the future value.
The formula for compound interest is:
FV = PV * (1 + r)^n
Where:
FV = future value
PV = present value (initial amount you have)
r = interest rate (as a decimal)
n = number of years
Let's calculate the future value:
Present value (PV) = $20,000
Interest rate (r): The rate of return on savings varies based on a variety of factors. Assuming an annual return of 5%, we can use the decimal form of 0.05 for the interest rate.
FV = $20,000 * (1 + 0.05)^13
Calculating this equation will give you the future value of the savings after 13 years.