Cash in the Bonds?

Maria in Boston has been buying bonds for her daughter for the last ten years, and she wants to know if she should cash them in to help her relieve some of the debt.

QUESTION: Maria in Boston has been buying bonds for her daughter for the last ten years, and she wants to know if she should cash them in to help her relieve some of the debt. She’s living paycheck to paycheck right now. Dave thinks it’s Maria’s money, but he doesn’t want her to feel guilty later.

ANSWER: I would cash them in, and I would either set that money aside for college in something better than bonds (because they don’t really pay very much) or use it toward the debt. There’s certainly nothing prohibiting you from doing that. I think the big thing you have to get past is that you’ve got bigger problems than $6,000.

I don’t want you to freak out later and think you’ve stolen your kid’s money or something. It’s your money. You put it in there. It’s for her benefit, and you’ve fed her and clothed her. You’re doing nothing morally wrong, but it just feels weird when it was money set aside for her and you end up using it for this kind of stuff.

I would probably roll up my sleeves and really put the screws to your budget. I’d really tighten up on that and go on beans and rice, rice and beans. No eating out. Can you take an extra job? What can you sell at a garage sale or on eBay? Go crazy here for a short period of time. Let’s see if you can move the needle on the debt without cashing these things in.

If you can’t make any progress at all, I’d probably pay off a few of the small debts with them and try to get the debt snowball rolling. That’s where you list your debts smallest to largest and pay them off in that order. I think it’s important to try a lot of other stuff before you go to this, since it’s not going to solve the whole problem anyway. It will just make a dent in it.

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