Setting aside money for college is one of the most helpful things a parent can do for their child, if they’re able to afford it. While saving tens of thousands of dollars to pay for school can be difficult, it can be more manageable if time is on your side.
To illustrate how much your child’s college fund can grow over the years, here’s a calculator that shows what the value of your investments will be by the time your child turns 18.
To use the calculator, input a daily investment amount and select when you plan to start saving: right when your kid is born or when they turn five, 10 or 15. You can also choose between two different account types to simulate how much your money will grow — an investment account with an average annual rate of return of 7% and a high-yield savings account with a 0.8% return.
The result will illustrate how compound interest — which grows faster than simple interest because it earns returns not only on your initial investment but on the interest you accumulate — can help accelerate the growth of your money.
Here’s what a $10 daily investment, which is about $300 a month, into a brokerage account for your child’s college fund will be worth at their 18th birthday, starting from four different ages.
- Birth: $131,686
- Age 5: $77,400
- Age 10: $39,145
- Age 15: $12,186