Fund College Or Pay Off The House?

Michael and his wife have $95,000 from an insurance settlement. Should they pay their mortgage off or pay down the mortgage and use the rest to start college funding for their 19-month-old son?

QUESTION: Michael in Kansas City and his wife have $95,000 from an insurance settlement. They have an $89,000 mortgage. Should they pay that off or pay down the mortgage and use the rest to start college funding for their 19-month-old son? They make $100,000 a year. Dave tells him to pay off the house.

ANSWER: If you save a house payment for a 19-month-old until he goes to school, he would be able to travel the world while he’s studying. I’m paying off the house tomorrow—maybe today if you still have time. Then you’ve got the money to do your retirement. You’ve got the money to build wealth. You’ve got the money to build his college fund…easily. Whatever was an old house payment, make sure that’s allocated to an investment—not just college but investment for retirement and those kinds of things. Jack some of that stuff up and use the fact that you are debt-free to become very wealthy. You should be able to do that mathematically like a hot knife through butter.

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