Take Care of College
Lou and his wife have $55,000 in individual stocks they want to move. They have four kids, and the oldest will leave for college in five years. Should they pay off the house or put the kids through college?
QUESTION: Lou in Atlanta is debt-free but the mortgage. Lou and his wife have $55,000 in individual stocks they want to move. Their mortgage payoff is about the same amount. However, they have four kids, and the oldest will leave for college in five years. They make about $80,000 a year. Should they pay off the house or put the kids through college?
ANSWER: I think what I would do is use this for college funds, and I wouldn’t necessarily split it by four. You’ve got four kids, and the one that’s going to be going to school the soonest would be the one that would get the biggest chunk. The one that would go to school the next would get the next chunk, and so on. The youngest one would get the least, but that would grow to the same amount. So in other words, you can sit down with your Endorsed Local Provider (ELP) for investments, and you can figure out how much of the $55,000 needs to go to each kid based on their age so that it grows to be the same amount that the oldest one will have in five years. If you give that one $25,000, as an example—that’d be almost half of it—and in five years, if that were to grow to $50,000, that just about puts them through school if they’ll stay in Georgia and go to an in-state school. Sixty grand will about do it right now, including books, tuition and dorm.
If you back that out then and say, okay, the other one’s going to get $15,000 and that will grow to $50,000 when they get there, and the other one’s going to get $10,000, and that will grow to $50,000 when they get there, and the other one’s going to get $7,000 because they’re the youngest one, that will grow . . . You’ve got to look at that number to where it all grows to the same amount. That’s what I would do with the $55,000, and then I would say, okay, college—check. It’s done. Then I’m just going to roll up my sleeves on my budget and say I want to get my home paid off out of my income.
I just want the college thing over with. I like that Forrest Gump philosophy—one less thing to worry about.