A 4-year course that costs 20,000 a year today, starting in 13 years, takes a fund of 155,303 on the first day, if fees rise 5% a year and the money not yet spent earns 3% a year during the course. Building that fund from nothing at an assumed 7% a year takes 619 a month for the 13 years, or 64,445 invested once today.
By the first year of the course, its fees have risen to 37,713. The 4 years cost 162,548 in all; the fund can start smaller than that because the money not yet spent keeps earning.
Year by year
What each year of the course costs, and what the fund holds for it on the first day:
| Course year | Fees that year | Set aside for it on the first day |
|---|---|---|
| 1 | 37,713 | 37,713 |
| 2 | 39,599 | 38,445 |
| 3 | 41,579 | 39,192 |
| 4 | 43,657 | 39,953 |
What the example leaves out
The rise in fees and both returns are assumptions, not forecasts. Living costs, scholarships, grants, loans and taxes are left out, and any of them changes the figure.