Parents wish to have $150,000 available for a child's education. If the child is now 4 years old, how much money must be set aside at 3% compounded semiannually tomeet their financial goal when the child is 18? The amount that should be set aside is... ?. Round up to the nearest dollar

To find how much money must be set aside today to meet a financial goal of $150,000 when the child is 18, we can use the formula for compound interest. The formula is:

\[
A = P \left(1 + \frac{r}{n}\right)^{nt}
\]

Where:
- $A$ is the future value ($150,000),
- $P$ is the present value (the amount to be set aside),
- $r$ is the annual interest rate (3% or 0.03),
- $n$ is the number of times the interest is compounded per year (semiannually means $n = 2$),
- $t$ is the number of years (18 years - 4 years = 14 years).

We need to solve for $P$.

Rearranging the formula:

\[
P = \frac{A}{\left(1 + \frac{r}{n}\right)^{nt}}
\]

Substituting the known values:

\[
P = \frac{150,000}{\left(1 + \frac{0.03}{2}\right)^{2 \times 14}}
\]

Now let's calculate it.The amount that should be set aside today to meet the financial goal is \$98,865.

Would you like further details on how the calculation was done or have any questions?

Here are some related questions:
1. How does changing the interest rate affect the amount to be set aside?
2. What if the interest was compounded quarterly instead of semiannually?
3. How would inflation impact the future value of $150,000 for education?
4. What if the parents wanted to invest the money in a different financial product?
5. How does the time remaining (in this case 14 years) impact the initial investment?

**Tip:** The more frequently interest is compounded, the greater the future value will be for the same interest rate.

Parents wish to have $150,000 available for a child's education. If the child is now 4 years old, how much money must be set aside at 3% compounded semiannually to meet their financial goal when the child is 18? The amount that should be set aside is... ?. Round up to the nearest dollar.

Learn how to calculate the amount of money needed to be set aside today to reach a financial goal of $150,000 for a child's education. This guide uses the compound interest formula with a 3% rate compounded semiannually over 14 years. Suitable for high school students and financial planning enthusiasts.

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