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?

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?

Answer 1

To determine what percent of her household's income needs to be set aside for the baby's college fund, we need to find the annual savings required for 18 years.

The annual savings required can be calculated by dividing the total amount needed ($90,000) by the number of years (18).

So, the annual savings required = $90,000 / 18 = $5,000.

Now, we need to calculate what percent of their net income is $5,000.

The total net income of Arianna and her husband is $60,000.

So, the percent of their income that needs to be set aside for the baby's college fund is ($5,000 / $60,000) * 100 = 8.33%.

Therefore, Arianna and her husband will need to set aside 8.33% of their household's income for the baby's college fund.