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Ask Dave

Private School Versus the Mortgage

Molly has twins about to begin eighth grade. She could sell her home to move into a better school district, but that will cost an extra $250,000. Should she continue with private school or move?

QUESTION: Molly in New York says her son is finishing his senior year in private school, but she has twins about to begin eighth grade. She could sell her home to move into a better school district, but that will cost an extra $250,000. Should she continue with private school or move?

ANSWER: The good news is if you move to where you like the high school and you move up in house, you get your money back when you sell. If you stay where you are and you spend the money on private school, you don’t get your money back. What we’re saying is you’re going to spend $200,000 either way. The question is are we going to spend it on a house or private education? And I like the idea of spending it on the house if the high school is okay because then you get it back, right? You own a house, and the money’s not just “gone.” It’s not consumed.

I understand investing in your child is not consuming money in the traditional sense—in a hedonistic sense or something—but the bottom line is you’re not getting the money back when you spend it on the school. You are going to get it back when you spend it on a house, so that part of the equation I like—the financial equation.

The question is can you afford that house? If not, then you probably can’t afford the private school either—private education. Really tear into it and throw as much at it as you can. The other thing you need to do is just go through your accounts and let’s put a label on them—earmark them—and say, “This is retirement. This is kids’ college. This is emergency fund. Oh, look! We can move this money toward the down payment too.” If you can find some money by really giving each of your dollars a mission, very clearly defining that rather than, “Oh, well, that’s kind of college”—no, it is college or it isn’t. When you do that and you and your husband really look through those accounts and you really decide where the money’s going to go, then try to squeeze some money out of those other areas toward this down payment, save for a year toward the down payment, and if I’m in your shoes, I’m moving.

The first reason is the biggest reason, and that’s financial. I will tell you that the Ramsey family did the exact same thing—my family—when our children were in elementary school. We moved to the number-one school district in our state—the number-one county school district in our state—which is one county over from where we were, in order to get in great public schools, and that saved us a bazillion dollars on private-school fees, and our kids had a wonderful public school experience. All three of them went through 12 years of public schools—virtually, one of them went private a couple of years is all—and obviously the real estate was a lot more expensive. We actually rented for two years to pull that off. We were able then to buy because we didn’t have the private-school fees, and that got us started.

I’ve got to tell you I kind of have a tendency to go that way anyway, and it’s not that I’m anti-private education. You’ve just got to really see the value in it in terms of return on investment and not be sending your kid there as a prestige item or thinking that somehow that’s the magic bullet that sends them off into the world and they’re automatically successful because they went to a $20,000-a-year daycare. That’s what some of these things do. You’ve really got to look at that. Is there really some bang for the buck there? Make that decision carefully.

If I’m in your shoes, Molly, you’re asking what Dave Ramsey would do—that’s what I did, and that’s what I would do in your situation.