Brian (46) and Liz (36) aren't sure about how they are saving for their children Lily (7), Ellie (4) and Lincoln (18 months)

Brian is a professor at UIC and Liz stays at home with children. They both work full time and have some funds already set aside for college. They have different higher education goals for their children and would like you to run an analysis of what type of funding, asset allocation and initial resources should be allocated to meet each goal.

Brian would like to provide for four years of undergraduate education for each child. The first two years including 100% room and board costs, the second two years only covering 50% of room and board costs. Brian would like to save enough for his children to attend an in-state public university. Brian is conservative and does not want to assume any tuition or fee waiver from being a professor.

Liz would like to provide for four years of private education for each child, including all room and board costs as well as budgeting enough for holiday plane tickets home.

Lily currently has $85,000; Ellie $75,000 and Lincoln $20,000 in the Illinois Bright Start 529 plan. All children are invested in "Index Moderate Age Based Portfolios".

For 2022, all accounts are being funded with $100 weekly contributions. Brian and Liz previously invested the proceeds of a business sale into these accounts. Liz and Brian have $30,000 cash they can allocate towards this goal, but would rather spend on upgrading the home. They are able to save more monthly if your analysis requires it.

Please complete an education funding plan providing:

1) A list of all assumptions you are making in this plan. Please include college inflation rates, market return expectations, estimated broken down higher education costs and any other assumptions needed to help Liz and Brian plan for college. Please provide references for your assumptions.

2) Using the methodology outlined in this section - and your time value of money skills - please provide a saving recommendation for both Brian and Liz's goals. In this recommendation include

• How much a year of college will cost when each child turns 18?
• What is the present value needed to fund college for each child when they turn 18?
• Considering existing 529 account balances, how much should Brian and Liz save weekly into each account to meet their respective goals?
• How can Brian and Liz accumulate funds with an eye on financial aid?

Answer rating: 100% (QA)

Assumptions 1 College Inflation Rate The average annual college inflation rate is assumed to be 5 This assumption is based on historical data and projections from reputable sources such as the College ... View the full answer