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Ask Dave

The Tuition Payment Plan

Denise has a question for Dave about the right way to pay for her son's college.

QUESTION: Denise in Texas has a son graduating from high school. She has cash to pay for the first two semesters of college, and enough in mutual funds to pay for the third semester. She wants to know when to pull out the money for his education.

Dave's ANSWER: Cash it in right before you need it. The reason is pretty simple, so that you are not just doing what I say. My mutual funds this year have made north of 16% from January through today. If they did that next year, or if they did 10% next year, you'd want to make that money instead of having it sit there. You have the first two semesters cash-flowed.

Now, what are we going to for money after this money? Make sure to not borrow money, and make sure your son is working in the summers to help add to that account to keep from going into debt after these three semesters go by in an eye blink.