Quick answer: Study costing 60,000 a year today, starting in 10 years for 4 years with costs rising 5% a year, will cost 421,244.37 in total; with 20,000 saved and a 6% return, save 2,151.86 a month.
How it's calculated
Each study year costs today's cost × (1 + cost rise)^(years until that year). The fund needed when studies start is the sum of those costs, each discounted at your return to the start date, because the money for later years stays invested.
Your current savings grow at the same return until the start. The monthly saving closes the gap, at the monthly equivalent of the return. It is saved every month until studies start; spreading the saving over the study years too gives a lower monthly amount.
Fees in private schools and universities have often risen faster than general prices. Ask the institution for its fee history, and see the inflation calculator for general price rises.
Worked examples
- 60,000 a year, starts in 10 years, 4 years, 5% rise: year 1: 60,000 × 1.05^10 = 97,733.68
- Total cost of the 4 years: 97,733.68 + 102,620.36 + 107,751.38 + 113,138.95 = 421,244.37
Frequently asked questions
What should the yearly cost include?
Tuition, housing, food, books, transport and travel home. For study abroad, include visas, insurance and exchange-rate risk.
What about scholarships?
Lower the yearly cost by the amount you are confident of receiving, or plan for the full cost and treat a scholarship as a bonus.
Is a 6% return realistic?
For money invested for 10 years or more in diversified funds it is a common assumption, but returns vary. Move to safer investments as the start date nears.
How much does starting early help?
A lot. Each extra year gives your savings more time to grow and spreads the amount over more months, so the monthly figure falls.
What cost rise should I use?
Look at how fees at your target university have changed in recent years. If you don't have that, the 5% default is a reasonable starting point.
What about studying abroad in another currency?
Enter costs in one currency throughout. If your savings are in a different one, exchange rates can change the real cost, so leave some margin.