Savings Plan Designer (Percent of Income)
This calculator shows you how much money you must contribute each month to an interest-bearing bank account or investment fund in order to reach your savings goals. Instead of calculating a fixed dollar amount to save per period, it calculates a percentage of your gross income.
Alternately, instead of basing the amount to save on gross income and income growth rate, one could substitute the current cost of education and tuition inflation rate in order to calculate a percentage of each year's tuition to save. (For the tuition inflation rate, use 6% to 8%.)
Parents should try to save at least one-third to half the projected costs of their child's college education. Ideally the savings plan (in the parents' name) should be established when the child is born, but it is never too late to start saving.
This calculator was used to derive the rule of thumb that a family should save at least 10% of their gross income per child starting the day the child is born. Likewise, this calculator is also the source of the heuristic that families should try to save 10% to 15% of each year's college costs per child, starting the day the child is born.
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