Pay debt or invest in kid’s 529 plan?


At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Dear Debt Adviser,
My wife and I have $32,000 in credit card debt. The good thing about this (if you can call it good) is we’re paying zero percent interest over the next 12 to 18 months. My question focuses on my son, who’s going to start college in two years and has a 529 college savings plan. Should I pump more money into his 529 plan, or should I keep paying down the credit cards?
— Sal

Dear Sal,
Can’t you do both? Seriously, you may be able to accomplish both of your goals if you have a decent plan in place. Start by calculating how much you and your wife take home in pay each month, and how much you spend. Then decide if you can cut back on expenses, or if you can somehow increase income. For example, if you get a big tax refund, increase your number of tax withholding exemptions to give you more take-home pay. If you have a big cable bill, maybe you can get by with streaming content instead.

Then, talk about how long you want to spend paying down that credit card debt. If you can set aside about $1,778 per month for credit card bills, you may be able to pay off the debt before your zero percent interest rate ends.

I also suggest that you talk about your financial plan with your kids. It’ll help them understand what it’s like to wrestle with debt. Point out how much money could be saved by attending a local community college for their first two undergraduate years. Discuss how many graduates are currently having trouble paying back their student loans. Take a look at the costs of schools your son may be interested in attending, how much you believe you can realistically save, and how much would be needed to be paid for with loans or other resources.

You don’t want your son to be burdened with massive amounts of student loans, but I also don’t want you to put your financial future in jeopardy. Your kids may need your support beyond their college years.

Good luck!

Ask the adviser

To ask a question of the Debt Adviser, go to the “Ask the Experts” page and select “Debt” as the topic. Read more Debt Adviser columns and more stories about debt management.

Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.