Example 2: Paul and Kristi have two children, ages 7 and 4. The couple wants to start saving for their children's 18. C ollege currently costs $25,000 per year and isexpected to increase at 5% per year. ssuming Paul and Kristi can earn an after-tax annual compound return of 8% and inflation is education. Each child will spend 5 years at a private college and will begin at age how much must they deposit at the end of each year to pay for their children's education quirements until they youngest goes to school? Assume that education expenses are withdrawn 296, at the beginning of each year and that the last deposit will be made at the beginning of the first year of the youngest child. Use the uneven cash flow method (NPV). Age of 1st child 1st child cash flows 2nd child cash flows Total cash flows 7 . 17 18 19 20 21 22 23 24 |25 - Step 1: Determine the net present value of the tuition payments as of today Step 2: Determine the annual payments needed to fund college tuition costs