Results 1 to 4 of 4

Math Help - College Savings Plan

  1. #1
    Newbie
    Joined
    Mar 2012
    From
    North Bay
    Posts
    4

    College Savings Plan

    Hey Guys,

    I am trying to figure out this problem dealing with a college savings plan for my kids.
    Its currently September.....my kids are 14,13, and twins at 11. They are all planning on going to college in September of the year they turn 18. We estimate that tuition will cost 5642 per year for each of their four years of college assuming 0% inflation. We want to calculate our savings plan with a 3% annual interest rate compounded monthly.

    How much should I save each month in my savings plan?

    Thanks.
    Follow Math Help Forum on Facebook and Google+

  2. #2
    MHF Contributor

    Joined
    Apr 2005
    Posts
    15,383
    Thanks
    1318

    Re: College Savings Plan

    If you put S dollars in the bank each month then in n months it will have increased to S(1+ .03/12)^n= S(1.0025)^n. Of course, each month you will have one less month for the money added that year to accrue interest. That is the money put in the bank the first year will earn S(1+ .03/12)^n, the money put in the second month will have earned S(1.0025)^{n-1}. That means that if you have a total of n months to save, and put S dollars in the account each month, at the end of those n months you will have S+ S(1.0025)+ S(1.0025)^2+ \cdot\cdot\cdot+ S(1.0025)^{n-1}+ S(1.0025)^n. That is a "geometric" series, of the form \sum Ar^i with A= S and r= 1.0025. It is easy to show that the sum of such a geometric series is A\frac{1- r^{n+1}}{1- r}. For your sum that is S\frac{1.0025^{n+1}- 1}{.0025}. Put in the number of months you will have to save for each one, set it equal to 5642, and solve for S. For given n, \frac{1.0025^n- 1}{.0025} is a specific number and solving for S means just dividing 5642 by that number.
    Follow Math Help Forum on Facebook and Google+

  3. #3
    Newbie
    Joined
    Mar 2012
    From
    North Bay
    Posts
    4

    Re: College Savings Plan

    Thanks for the help !
    Follow Math Help Forum on Facebook and Google+

  4. #4
    MHF Contributor
    Joined
    Dec 2007
    From
    Ottawa, Canada
    Posts
    3,085
    Thanks
    67

    Re: College Savings Plan

    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. interest savings
    Posted in the Business Math Forum
    Replies: 4
    Last Post: April 15th 2011, 07:35 AM
  2. Savings Bank Account...
    Posted in the Business Math Forum
    Replies: 1
    Last Post: February 1st 2010, 09:47 AM
  3. savings, interest, inflation etc...
    Posted in the Business Math Forum
    Replies: 1
    Last Post: July 19th 2009, 07:38 PM
  4. Savings & Inflation
    Posted in the Algebra Forum
    Replies: 1
    Last Post: January 24th 2009, 02:19 PM
  5. My Plan, before entering college calculus
    Posted in the Calculus Forum
    Replies: 12
    Last Post: August 17th 2008, 05:54 PM

Search Tags


/mathhelpforum @mathhelpforum