As mentioned earlier, time can
be our best friend when saving for a child's education. The
earlier we start saving the less of our own money we will need
to save to reach our goals. The great thing about saving and
investing is that our money is working for us!
As our savings earns returns
and we reinvest those returns, we begin to earn returns on our
returns allowing our savings to grow even faster. This is
called the 'magic' of compounding interest and over time, it can
produce dramatic results.
Here's an example:
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If your goal is
to save $20,000 by the time your daughter enters college in 15
years and you could earn 6% return on your savings you would
need to save $68.77 per month. You would have contributed
$12,378.60 and $7,621.40 would have been earned in returns.
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If you had 10
years to accomplish the same goal your monthly contribution
would need to be $122.04 each month. You would have contributed
$14,644.80 and $5,355.20 would be earned in returns.
�
What if you have
just 5 years to accomplish our goal? Your monthly contribution
would need to be $286.66. Your contribution would be a total of
$17,199.60 and your returns would total $2,800.40.
Time
makes a difference! The longer time factor allows your
contributions to be smaller and our earnings to be greater. The
earlier we start saving the less of our own money we will need
to save. Time allows our money to work for us.
Return to Saving for Education topics:
The Value of Education
What Will It Cost?
Who's Paying?
How To Make It Happen
It's Never Too Late
Resources
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