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Posted: 12/27/2005 2:49:04 PM EDT
[Last Edit: 12/27/2005 2:49:45 PM EDT by glock223]
My daughter's great-grandmother gave her $5,000.00 in an investment account for education for her 3rd birthday today.

How do you figure compounded interest on this amount in order to guesstimate what this will be worth (the original 5K) in 15 years when she's 18? It is an education only type account that can only be used for educational purposes only.

And, yes, we will be adding to it along the way

Thanks
Link Posted: 12/27/2005 2:53:21 PM EDT
(1+interest rate)^number of years invested*principal amount
Link Posted: 12/27/2005 3:07:12 PM EDT
Not to hijack your thread. But I am in the same situation and and more interested where the best place is to put the money that will be used for a childs education 15-16 years in the future. Assuming that more money is added every year (mainly birthday and christmas money from relatives).
Link Posted: 12/27/2005 3:10:06 PM EDT
Do they have prepaid colledge funds there? In Florida, for a few more grand you can pay up front now. My buddy bought one for his daughter a few years ago for about 7k.
Link Posted: 12/27/2005 4:54:33 PM EDT
I'm w pooby on this one. I can't imagine "investing" safely in a better spot than a pre-paid tuition program. PS. I'm no guru. Stay safe
Link Posted: 12/27/2005 6:34:27 PM EDT

Originally Posted By raven:
(1+interest rate)^number of years invested*principal amount



OK, in english this means? 1+interest times number of years invested times principal amount?
Link Posted: 12/27/2005 6:37:22 PM EDT

Originally Posted By glock223:

Originally Posted By raven:
(1+interest rate)^number of years invested*principal amount



OK, in english this means? 1+interest times number of years invested times principal amount?



Just google "compound interest calculator''.
Link Posted: 12/27/2005 6:39:15 PM EDT

Originally Posted By glock223:

Originally Posted By raven:
(1+interest rate)^number of years invested*principal amount



OK, in english this means? 1+interest times number of years invested times principal amount?



year 0: $5000

year 1: using 5% as interest rate for example

$5000 + (.05 * 5000)

year 2: ($5000 + (.05 * 5000) + (.05 * ($5000 + (.05 * 5000) )

year 3: ($5000 + (.05 * 5000) + (.05 * ($5000 + (.05 * 5000) )
+ (.05 * ($5000 + (.05 * 5000) + (.05 * ($5000 + (.05 * 5000) ))

etc.


another way: 5000 * 1.05 * 1.05 * 1.05 * 1.05.....
Link Posted: 12/27/2005 6:41:04 PM EDT
if you take $5000 now and add $50/mo, and get an annual rate of 6% you'll have $26,811 at the end of 15 yrs.
Link Posted: 12/27/2005 7:05:33 PM EDT
Thanks guys, I knew I could count on ya. Is interest compounded once annually?
Link Posted: 12/27/2005 7:09:02 PM EDT

Originally Posted By glock223:
Thanks guys, I knew I could count on ya. Is interest compounded once annually?



my example had monthly compounding

if you up the $50 deposit to $100 you'll have upwards of $41k at the end....
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