Question
Arianna has just had a child. She and her husband’s net income is $60,000 a year between them. She has established a savings account for her child that needs to contain $90,000 after 18 years. What percent of her household’s income will need to be set aside for the baby’s college fund?
a. 8.3%
b. 9.6%
c. 5.6%
d. 8%
To find the percent of her household's income that needs to be set aside for the baby's college fund, we can divide the desired savings amount ($90,000) by the total net income over 18 years ($60,000/year * 18 years = $1,080,000).
$90,000 / $1,080,000 = 0.0833
Converting 0.0833 to a percentage, we get 8.3%.
Therefore, the answer is a. 8.3%.