Question

Tara and her parents want to save at least $40,000 for college in 8 years. Which statement describes the most effective savings plan for Tara and her parents to meet their goal? Tara and her parents should make deposits of $300 every month into a college savings account. Tara and her parents should make deposits of $450 every month into a college savings account. Tara and her parents should make deposits of $3,000 every year into a college savings account. Tara and her parents should make deposits of $4,000 every year into a college savings account

Answer 1

Tara and her parents should make deposits of $450 every month into a college savings account.

Answer 2

The best option for saving for college that is listed is for Tara and her parents to make deposits of $450 every month into a college savings account. Saving monthly over yearly is usually a better option because it's easier to break down monthly payments and budget for it rather than remembering once a year to put money in a college savings fund. If you need $40,000 at the end of 8 years, to find the amount you should deposit monthly goes as follows:

Take the amount of years and multiply it by 12 months in a year, (8)(12) = 96. There are 96 months between now and needing the money for college. To then find the amount to save take 96 and divide it by $40,000, the total is $417, so if they only saved $300, they would not have enough therefor saving $450 allows for the money to be there by the 8 year mark.