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Investing In A Child’s College Fund Versus Paying Off Your Mortgage

By Erik Folgate

If you have young children and a house, you may have faced the dilemma of whether to pay off more money on your mortgage or start putting money towards a college tuition fund for your children. So, what’s the right answer? Well, every answer is different given someone’s situation. Here are some things to consider:

  • First off, evaluate how many kids your going to be putting through college and how much time you have to build up cash for college. If you’ve got teenagers, then you’ll have to start saving yesterday for college.
  • How much do you owe on your mortgage? Could you pay down your mortgage AND save for college at the same time? Most people don’t have enough disposable income for this, but it’s worth checking out to see if you can swing both without putting a strain on your family.
  • Will you be making enough money to pay cash for your children’s college expenses when they enroll? You may have a great income, and you’ll be able to write a $5,000 check for tuition, but planning for this type of expense is always the better thing to do. It’s tough to say with 100% confidence that your situation will be that favorable when your kids leave for college.

If I was faced with this decision, I would start funding a college fund before I started paying off a mortgage. Your mortgage is an appreciating asset, but college tuition, room, and board are a HUGE expense. I don’t think your a bad parent if you don’t help your children pay for college, but if you have the financial opportunity to gradually invest small amounts of money towards their college expenses, then I think you should do it as a responsible parent. You can fully fund an ESA for 10 years and have plenty of cash piled up for your child’s tuition, room, and board. Just make sure that you actually have the extra cash to invest in your child’s future. Don’t stop paying the mortgage or utility bill just to fund an ESA.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://madsaver.com Mac

    The second I saw the title of this post, I already knew my answer, the kids come first. College tuition prices are soaring of late, and homes are depreciating at nearly the same rate. I couldn’t imagine what prices will be in 15 years for school, so it’d be smart to start saving asap to prepare for the sticker shock I’m sure we’ll be experiencing down the road.

  • Cari

    ok, not convinced ESA is right answer. We are in between the thought process mentioned. We only have 11 years left on our 15yr mortgage. If we get serious we can pay off the house in 5- 7 years then able to afford $2,000 a month in college tuition payments…..

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