What if I cannot afford the monthly figure?

Start with what you can and increase it later — the compounding matters more than the amount in the early years. Contributing 200 a month from birth beats contributing nothing until you can afford 573, because the first years are the ones with the most growth ahead of them.

How much does starting late really cost?

In the example, delaying eight years multiplies the required monthly contribution by 2.25. The target is unchanged and the return is unchanged — the only thing lost is time, which is precisely the input that compounding needs.

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Plan savings for your child's college education.

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Saving for education: why starting early does most of the work

Education saving is an ordinary future-value problem with one unusual feature — the deadline is fixed at birth and cannot move. That makes the start date the single most powerful variable, far more than the return you achieve.

How it works

Inverts the future-value-of-an-annuity formula to solve for the monthly contribution needed to hit a target by a date.
Splits the target into what you contribute and what growth provides.
Lets you compare starting now against starting later, which is where the real cost of delay shows.

FV = PMT × ((1 + r)^n − 1) ÷ r

solved for the contribution:
  PMT = FV × r ÷ ((1 + r)^n − 1)

  r = annual return ÷ 12
  n = months until the money is needed

Worked example

Saving 200,000 for a child's education over eighteen years at a 5% annual return, against starting eight years late with ten years left.

r = 0.05 ÷ 12 = 0.004167, n = 216 months
growth factor = 349.20
from birth: 200,000 ÷ 349.20 = 572.73 a month
you contribute 123,711; growth provides 76,289
starting with ten years left: 1,287.98 a month

573 a month from birth, or 1,288 a month if you start eight years late — 2.25 times as much for the same target. Growth supplies 38% of the total when you start early and far less when you do not.

Reading the result

The return matters less than the runway. Doubling the assumed return changes the monthly figure by far less than starting eight years earlier does, and the return is the part you cannot control.
Costs inflate, so the target should too. Education costs have historically risen faster than general inflation in many countries; a target set in today's money will be short by the time it is needed unless you index it.
Match the risk to the horizon. Eighteen years is long enough for equities to make sense; three years is not. Most education-saving plans shift progressively into cash as the date approaches, for the same reason you would not hold a house deposit in shares.
Check whether a tax-advantaged education account exists where you live. The tax relief on those typically outweighs any realistic difference in investment return between one fund and another.

Common questions

What if I cannot afford the monthly figure?: Start with what you can and increase it later — the compounding matters more than the amount in the early years. Contributing 200 a month from birth beats contributing nothing until you can afford 573, because the first years are the ones with the most growth ahead of them.
How much does starting late really cost?: In the example, delaying eight years multiplies the required monthly contribution by 2.25. The target is unchanged and the return is unchanged — the only thing lost is time, which is precisely the input that compounding needs.