9488

Dave Says: The Tuition Payment Plan

Dear Dave,

Our son is graduating from high school next spring. We’ve saved cash to pay for his first year of college, and we have enough in mutual funds to pay for another semester. When should we pull out the money to use for his education?

Denise

Dear Denise,

I wouldn’t touch the money until right before you write the checks. However, I don’t want you to follow my advice just because I said so. My mutual funds have made a little more than 16 percent this year. If they stay at that pace, or if they make just 10 percent during the first part of 2013, I’d want it to just sit there a while longer. Why not let the power of compound interest do its thing and make you as much money as possible?

The biggest question is what are you going to do for cash after the first three semesters? Your son needs to make sure he’s working summers, and maybe even part-time during school, in order to fuel his education. And neither of you should borrow money to make it happen. You guys have gotten him off to a great start. So if he does his part there’s no reason for either of you to go into debt for his college degree!

—Dave

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