In this second set of scenarios, we look at what some might call more “realistic” sequences of contributions.
While the scenarios in Part 2 offer the best results in terms of education funding, the reality is that many young families are not going to have 10s of thousands of dollars on-hand for large initial contributions. Some families may struggle to ever fully maximize the grants or contributions. However most families will hopefully find it easier to contribute as the parents’ careers progress over time and their income grows.
To explore these more realistic constraints, this article covers two more scenarios. In the first, we model steadily increasing contributions that conclude with maximizing the standard CESG but never reaching the lifetime contribution limit. In the second, we model slightly higher steadily increasing contributions that conclude with maximizing both CESG and reaching the lifetime contribution limit.
Because these scenarios involve greater contributions later in the child’s life, there is less of an opportunity for compounding of returns. Therefore neither of these scenarios will provide anywhere near the level of funding for education that the scenarios in Part 2 do.
Maximizing Only Grants
This scenario starts with a modest annual contribution of $600 ($50 a month). It increases the contributions by another $600 a year every three years. This maximizes the total grants but never reaches the lifetime contribution limit.
In this scenario, the account value peaks at $65,665.13.
Then, as we start withdrawing money to fund the child’s education it ends up short by $85,565.57.
This shortfall obviously represents a significant amount of money that will have to come from other sources such as scholarships, part-time jobs, co-op jobs, internships or extra funding from the parents’ income.
| Year | Value | Contributions | Grants | Withdrawals | Earnings | Stocks | Bonds |
|---|---|---|---|---|---|---|---|
| 0 | $0.00 | $600.00 | $120.00 | $0.00 | $43.20 | 100% | 0% |
| 1 | $763.20 | $600.00 | $120.00 | $0.00 | $88.99 | 100% | 0% |
| 2 | $1,572.19 | $600.00 | $120.00 | $0.00 | $137.53 | 100% | 0% |
| 3 | $2,429.72 | $1,200.00 | $240.00 | $0.00 | $232.18 | 100% | 0% |
| 4 | $4,101.90 | $1,200.00 | $240.00 | $0.00 | $332.51 | 100% | 0% |
| 5 | $5,874.41 | $1,200.00 | $240.00 | $0.00 | $438.86 | 100% | 0% |
| 6 | $7,753.27 | $1,800.00 | $360.00 | $0.00 | $594.80 | 100% | 0% |
| 7 | $10,508.07 | $1,800.00 | $360.00 | $0.00 | $760.08 | 100% | 0% |
| 8 | $13,428.15 | $1,800.00 | $360.00 | $0.00 | $935.29 | 100% | 0% |
| 9 | $16,523.44 | $2,400.00 | $480.00 | $0.00 | $1,164.21 | 100% | 0% |
| 10 | $20,567.65 | $2,400.00 | $480.00 | $0.00 | $1,406.86 | 100% | 0% |
| 11 | $24,854.51 | $2,400.00 | $480.00 | $0.00 | $1,580.87 | 90% | 10% |
| 12 | $29,315.38 | $3,000.00 | $600.00 | $0.00 | $1,777.43 | 80% | 20% |
| 13 | $34,692.81 | $3,000.00 | $600.00 | $0.00 | $1,952.93 | 70% | 30% |
| 14 | $40,245.74 | $3,000.00 | $600.00 | $0.00 | $2,104.60 | 60% | 40% |
| 15 | $45,950.34 | $3,600.00 | $720.00 | $0.00 | $2,262.17 | 50% | 50% |
| 16 | $52,532.51 | $3,600.00 | $720.00 | $0.00 | $2,387.81 | 40% | 60% |
| 17 | $59,240.32 | $3,600.00 | $360.00 | $0.00 | $2,464.81 | 30% | 70% |
| 18 | $65,665.13 | $0.00 | $0.00 | $-18,377.74 | $1,702.35 | 20% | 80% |
| 19 | $48,989.74 | $0.00 | $0.00 | $-37,527.34 | $378.26 | 10% | 90% |
| 20 | $11,840.66 | $0.00 | $0.00 | $-38,315.41 | $0.00 | 10% | 90% |
| 21 | $-26,474.75 | $0.00 | $0.00 | $-39,120.04 | $0.00 | 10% | 90% |
| 22 | $-65,594.79 | $0.00 | $0.00 | $-19,970.78 | $0.00 | 10% | 90% |
| 23 | $-85,565.57 | $0.00 | $0.00 | $0.00 | $0.00 | 10% | 90% |
Maximizing Grants and Contributions
This scenario starts with a larger annual contribution of $1500 ($125 a month). It also increases the contributions by another $600 a year every three years. This maximizes the total grants and eventually reaches the lifetime contribution limit.
In this scenario, the account value peaks at $90,733.16.
Then, as we start withdrawing money to fund the child’s education it ends up short by $58,726.42.
As with the first scenario, this is still a significant shortfall that would have to be made up through funding from other sources.
| Year | Value | Contributions | Grants | Withdrawals | Earnings | Stocks | Bonds |
|---|---|---|---|---|---|---|---|
| 0 | $0.00 | $1,500.00 | $300.00 | $0.00 | $108.00 | 100% | 0% |
| 1 | $1,908.00 | $1,500.00 | $300.00 | $0.00 | $222.48 | 100% | 0% |
| 2 | $3,930.48 | $1,500.00 | $300.00 | $0.00 | $343.83 | 100% | 0% |
| 3 | $6,074.31 | $2,100.00 | $420.00 | $0.00 | $515.66 | 100% | 0% |
| 4 | $9,109.97 | $2,100.00 | $420.00 | $0.00 | $697.80 | 100% | 0% |
| 5 | $12,327.77 | $2,100.00 | $420.00 | $0.00 | $890.87 | 100% | 0% |
| 6 | $15,738.64 | $2,700.00 | $540.00 | $0.00 | $1,138.72 | 100% | 0% |
| 7 | $20,117.36 | $2,700.00 | $540.00 | $0.00 | $1,401.44 | 100% | 0% |
| 8 | $24,758.80 | $2,700.00 | $540.00 | $0.00 | $1,679.93 | 100% | 0% |
| 9 | $29,678.73 | $3,300.00 | $660.00 | $0.00 | $2,018.32 | 100% | 0% |
| 10 | $35,657.05 | $3,300.00 | $660.00 | $0.00 | $2,377.02 | 100% | 0% |
| 11 | $41,994.07 | $3,300.00 | $660.00 | $0.00 | $2,619.38 | 90% | 10% |
| 12 | $48,573.45 | $3,900.00 | $780.00 | $0.00 | $2,875.69 | 80% | 20% |
| 13 | $56,129.14 | $3,900.00 | $660.00 | $0.00 | $3,095.15 | 70% | 30% |
| 14 | $63,784.29 | $3,900.00 | $0.00 | $0.00 | $3,248.85 | 60% | 40% |
| 15 | $70,933.14 | $4,500.00 | $0.00 | $0.00 | $3,394.49 | 50% | 50% |
| 16 | $78,827.63 | $4,500.00 | $0.00 | $0.00 | $3,499.76 | 40% | 60% |
| 17 | $86,827.39 | $500.00 | $0.00 | $0.00 | $3,405.77 | 30% | 70% |
| 18 | $90,733.16 | $0.00 | $0.00 | $-18,377.74 | $2,604.80 | 20% | 80% |
| 19 | $74,960.22 | $0.00 | $0.00 | $-37,527.34 | $1,235.29 | 10% | 90% |
| 20 | $38,668.17 | $0.00 | $0.00 | $-38,315.41 | $11.64 | 10% | 90% |
| 21 | $364.40 | $0.00 | $0.00 | $-39,120.04 | $0.00 | 10% | 90% |
| 22 | $-38,755.64 | $0.00 | $0.00 | $-19,970.78 | $0.00 | 10% | 90% |
| 23 | $-58,726.42 | $0.00 | $0.00 | $0.00 | $0.00 | 10% | 90% |
