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Ask Dave

Pre-paid Tuition

Dave isn't a fan of pre-paid college tuition, as he explains to Robby.

QUESTION: Robby asks what Dave thinks of pre-paid tuition. Dave’s answer is quick.

ANSWER: I don’t like it. Pre-paid college rate of return is the inflation rate of the tuition, just like a pre-paid funeral. You make about 7% on your money, whereas in an educational savings account you’ll make about 12%. It grows tax-free in that setting.