Overview

In the previous example we calculated what you need to save to be able to pay for two series of overlapping annual future costs.

In this example we calculate the sum you would need to set aside now to be able to pay for the future costs.

Example

On January 1st, 2024, you want to set up a savings account for your children's education.

Your rate of return is 4 %.

A year of education today costs $10,000, and inflation is 2 %. Since your son Bart will go to college in ten years time, this represents an annual cost of $12,189.94, which will increase by 2 % each year to compensate for inflation.

Two years later, for your daughter Lisa the first year cost will have risen to $12,682.42.

How much do you need to deposit now to be able to cover the expected annual costs of your children's education?

Set up the following cashflow or select the Deposit for education example in the Help > Examples menu.

Date	Type	Amount	Occurs	#	Change	Step	Comment
1-1-2024	unknown	1	monthly	120			Monthly deposit
1-1-2034	outflow	12,189.94	annually	5	2 %	1	Education Bart
1-1-2036	outflow	12,682.42	annually	5	2 %	1	Education Lisa

Enter 4 into the rate field and select annual compounding in Compute Options.
Make sure that Auto update is checked.

You'll find the answer in the x Value field: 77,734.61

Note: when a calculated value exceeds the educational version limit, it is displayed in red. This just means that you would not be able to enter such a value manually.

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