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Suppose that you have a child who may attend college in 16 years, and you haven't started to save yet. If the local university costs $10,000 a year and you can earn 9 percent annually, how much should you save?
Use Quicken's College Calculator to determine your savings goal:
Choose Planning, Financial Calculators, College.
Quicken displays the College Calculator dialog box.
Enter the annual college costs.
Move the cursor to the Annual College Costs text box. Then enter the current annual costs at a school Junior may attend. For this exercise, type in $10,000.
Enter the number of years until enrollment.
Move the cursor to the Years Until Enrollment text box and enter a number. For example, if Junior will start college in 13 years, type 13.
Enter the number of years enrolled.
Move the cursor to the Number of Years Enrolled text box and enter a number. Assuming that Junior doesn't fool around, type 4 or 5.
Enter the amount of the current college savings.
Move the cursor to the Current College Savings field and enter an amount. For this scenario, use $0.00.
Enter the annual yield that you expect the college savings to earn.
Move the cursor to the Annual Yield text box and type the percent — 9 percent, in this case.
Enter the inflation rate anticipated in college tuition.
Move the cursor to the Predicted Inflation text box and type the inflation rate percent. Try 4 percent as the rate.
Indicate whether you plan to increase your annual contribution because of inflation.
Select the Inflate Contributions check box if you plan to annually increase — by the annual inflation rate — the amount you save.
After you enter all the information, the Annual Contribution field shows how much you need to save each year until the child graduates from college: If Junior goes to a 5-year college that currently costs $10,000 a year, and you expect to earn 9 percent annually and anticipate 4 percent annual inflation, then you need to start saving $2,171.27 every year.
To get more information on the annual deposits, tuition, and balance, click the Schedule button, which appears on the face of the College Calculator dialog box. Quicken whips up a quick little report showing the annual deposits, tuition, and ending college savings account balances for each year you'll add to, and Junior withdraws from, the college savings money.
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