Description of image

Question 16

Saving for college can use tax-advantaged vehicles (e.g., 529-style accounts) or taxable savings. A common practical exercise is to calculate future value of monthly contributions at a plausible annual return. Suppose you save $200/month for ten years at an annual return of 5% compounded monthly. That balance can help you estimate whether the account will meet a tuition target or the remainder you’ll need. Knowing how to compute or estimate future value underpins realistic planning and helps set target monthly contributions. (Numbers are illustrative.)

If you save $200 monthly for 10 years at 5% annual return (compounded monthly), roughly how much will you have?

Did You Also Know...

By Wise Wallet

Starting to save even modest amounts early takes advantage of compounded growth and can dramatically increase long-term wealth.