How to Calculate College Savings

Calculating college savings helps people save for college.

With proper planning, you can save for a college education before college. This should minimize any costs related to your education. Consider, for example, parents who want to save for their child's education. They have 18 years until the child will go to college. They can earn an interest rate of 6 percent on their savings. They estimate college will cost $100,000 and want to know how much they need to save each year to reach this goal.

Things You'll Need

• Future value of annuity factors table

Instructions

1. Determine the interest rate you can earn on savings, the amount of time you have to save and how much you will need in the future.

2. Find the future value of an annuity factor on the future value of annuity factors table. In our example, use 6 percent and 18 years, so the factor is 30.9057.

3. Divide the amount you need in the future by the future value of an annuity factor. In our example, $100,000 divided by 30.9057 equals $3,235.65. Thus, the parents must save $3,235.65 each year to have $100,000 when their child goes to college.

References

• Study Finance: Future Value of Annuity Factors Table
• Get Objects: Future Value of Annuities