The prices of private schools and college tuition fees are raising, sometimes faster than inflation. Giving an education is not only about competition and survival, but also about freedom of choice for your child.
With a degree s/he will have a choice where to go and more time to do other things, enjoy the life.
I start wondering is it worth to push ourselves to save more money for a private school and degree, or we will do it on pay as you go basis, i.e. when the time comes we somehow manage it. There is sayings that if you want to make God laugh, tell him about your plans. Nevertheless, I want to understand better what it takes for a family to give kids education.
So here we go, some data and assumptions:
- Private school tuition fee per annum per child (assuming years 11-18) - $20 K
- College tuition fee per annum per person (years 19-22) -$ 30 K assuming 4 years education.
- Education inflation fees rate -3% a year. We do know how much does it cost today, this is to mitigate uncertainty of the price increase.
- Annual Contribution, this is for the case when you want to save some money and prepare yourself in advance, for purpose of this exercise it is -$40 K a year, no increases.
- Tax rate - 40%. This is for the case when you want to use interest on your capital to pay for the college/school.
- I assumed that we have some rental income of $12 K a year and rent fee inflation will be 2% a year.
- Interest rate received on the invested capital is 4% a year.
- Initial investment is $ 250 K in year 2013.
