Children's Education Fund Calculator

What the tool works out

A five-year-old, university at 18, 18,000 a year for four years: the target is 72,000 and the tool asks for 311.14 a month to get there. The 2,000 already saved grows to 3,825.91 over the 13 years, which leaves 68,174.09 for the monthly contributions to cover.

The cost figure is the weak point

That target is in today's money, and this is the tool's largest simplification. It multiplies the annual cost entered by the number of years and stops. Education costs 13 years from now will not be the costs entered today. Run the same scenario with the cost inflated at 3% a year and 18,000 becomes 26,433.61, the target becomes 105,736 and the monthly figure becomes 465.11. That is half as much again as the headline, from an assumption the tool never asks about.

The workaround is to enter an inflated cost rather than today's. There is no field for it, so the inflating has to happen before the number goes in. The BIS publishes consumer price series for more than 60 countries, which is a starting point for what general price drift has looked like, though education is priced separately from that basket and can follow its own path.

Which input moves the answer

Three of the four inputs push the monthly figure down and only one pushes it up. Raising the university start age by 1% cuts the monthly contribution by 1.91%, because it buys more months to save across. Raising the expected return by 1% cuts it by 0.39%. Raising the current balance by 1% cuts it by 0.05%. The annual cost is the only input that raises it, by 1.06% for each 1% added. Time is the biggest lever here, and it is the one that runs out.

What starting early is actually worth

Starting early is worth what the arithmetic says it is worth, no more. Saving 100 a month from birth to 18 at 5% produces 34,920.20 across 216 months. The same 100 a month started at age 10 produces 11,774.05 across 96 months. Just under half the time produces about a third of the money, which is the compounding effect stated plainly.

The expected return is an assumption, not a measurement. Long-run returns are measured asset by asset and country by country rather than as a single number: a dataset covering 16 advanced economies from 1870 to 2015 assembles total returns for equity, housing, bonds and bills to answer which assets have earned most over the long run. Running the tool at a low, a middling and a high rate gives a range rather than a single figure that looks more certain than it is.

What the calculator leaves out

• Education cost inflation, which is not modelled and has to be built into the cost entered
• Any change in the contribution over the period, including pauses
• Tax on the fund, which depends entirely on the account it sits in and the country
• Scholarships, bursaries, grants, part-time earnings and student borrowing
• Whether the child goes at all, or goes somewhere with a different cost
• Currency movement, where the education is priced in a different currency from the saving

For educational illustration only

This calculator multiplies a cost by a number of years, grows any existing balance, and solves for the monthly deposit that closes the difference. Every input is held constant for the whole period. The output is a starting figure for a conversation, and it will need re-running as costs and circumstances move.