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Ask Dave

Robbing From My Child?

Mandy should not take the $15,000 she's saved for her son's college education to pay off her debts. She needs to move it to a 529.

QUESTION: Mandy had $15,000 saved in a mutual fund for her son’s college education.  She has some debts she wants to pay off and thought of using that $15,000.  Should she do that or will she be robbing from her son?  If she keeps saving it, where should she put the money so it will grow?

ANSWER: You should not use this money to pay off your debts.  You should move it into a 529 college savings plan.  With this, you will be putting a mutual fund into a college savings plan.  It will grow tax-free for college.  You can set this up through one of our Endorsed Local Providers who will help you put your son’s money in the best type of investment tool.

Normally, you should start college savings with the ESA, Educational Savings Account, but ESAs are only limited to $2,000 a year.  In this situation where there’s a much bigger lump sum, you need to start with the 529 so you can dump everything in and continue saving and growing that money.