Question

Your Uncle Paulie comes to you seeking advice on how to pay for college tuition for his two boys, Ivan who is 2 and Martin who is 6. He is set on Martin going to his alma mater, where tuition is currently $40,000. He wants Ivan to attend a local public university for 2 years, travel abroad at Ivan’s expense, and then finish his last two years at the local university. Tuition is currently $30,000. Because of the difference in cost, Uncle Paulie will cover 3 years for Martin and 4 years of tuition for Ivan. He anticipates school costs will rise 4% annually and feels he can achieve 15% annually. How much should he set aside and invest today in order to meet his funding goals?

Answer 1

Year	Tuition Fees	Discounting Factor [1/{1.15^Year}]	PV (Total Tuition Fees* Discounting Factor)
12	40000	*(1.04^12)=	64041.29	0.18690715	11969.77477
13	64041	*(1.04)=	66602.94	0.162527957	10824.83979
14	66603	*(1.04)=	69267.06	0.141328658	9789.420336
15				0.122894485	0
16	30000	*(1.04^16)=	56189.44	0.10686477	6004.671287
17	56189	*(1.04)=	58437.01	0.092925887	5430.311425
18	58437	*(1.04)=	60774.5	0.080805119	4910.890332
19	60774	*(1.04)=	63205.48	0.070265321	4441.152996
				Sum of PVs   =	53371.06094

Sum to be kept aside today = $53371.06