My friend from Rich Credit Debt Loan asked me a simple, but thought-provoking question last week. I’m probably going to tease you with the actual question for a little while. We decided the best answer for the question was to create a calculator and I haven’t had the time to do such a thing. However, the question centered around his plan to save enough money to put his children through college.
In order to answer any question like that, you have to start by gathering information. “How much would tuition be now?” was a key question we had to answer. Often, you can’t know where things are going if you don’t know where they start. Then we looked to how long he had to save for his children. Then we tried to model how his investments would perform over that span. Lastly we searched the web to see how much college costs are likely to go up while his kids grew. The sobering fact hit us over the head… hard. We found a few sites that estimated costs to go up between 6 and 9%… which was exactly what we estimated as the growth on his investments. In other words, compound interest isn’t likely to help him save for college.
There’s some debate about whether putting a child through college a parent’s responsibility. No matter which side you are on with that debate, I found it refreshing to see someone plan their finances far in advance. It makes me wonder what those who aren’t thinking 10 to 15 years ahead are going to do when college comes around. I know there are always loans and scholarships, but wouldn’t it be nice to not have to think about that?
I wish Rich Credit Debt Loan some luck on whatever path he chooses. It looks like he’s going to need it.