3558

Dave Says: No Option but Education

Dear Dave,

I hear you talk about using an ESA when it comes to funding college for your kids. What can you do with an ESA, though, if your child decides he or she doesn’t want to go to college?

Anonymous

Dear Anonymous,

You may just have to shoot the kid. I’m kidding, of course, but if something like that happens, you’re going to get killed on the investment. An Education Savings Account (ESA) can only be used for education. If you use it for anything else, you’ll get hit with a 15 percent penalty plus your tax rate. The government’s going to take about half of your money and maybe more.

Now, college is a great idea, but should everyone go to college? Of course not. Some people just aren’t cut out for college, and some kids don’t need four years at a university to find the training they need to do what they want to do in life. In our house, we just talked about college as if it were going to happen from the very beginning. We said things all the time like, “This money is going into your college fund.” An ESA makes perfect sense in this kind of situation, but if the entire family isn’t committed to the importance of getting an education, then you shouldn’t be loading up an ESA.

But hey, if a kid doesn’t want to go the traditional college route, there’s always specialized training in several fields and plenty of vo-tech schools around. An ESA can be used for lots of these kinds of things, too, as long as the school participates in the federal student aid program.

I don’t have a problem with any of that, as long as there’s a plan. But letting a kid get the idea that they’re just going to party and lie around while mom and dad hand half of that ESA over to Uncle Sam? Really?

I don’t think so!

—Dave

* For more financial help, please visit daveramsey.com.
Comments and feedback can be sent to feedback@ldsliving.com