Should You Pay Off Debt or Save for Your Kids’ Future?
Written by
J. Arky
Edited by
Amber Barkley
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As you work throughout your career and start to earn a stable income, a question might arise in your mind: Is it better to pay off debt you’ve accumulated along the way, or, for parents and parents-to-be, should you put your efforts into saving for your children’s future? There’s no definitive answer, since everyone’s circumstances are different. However, there might be good reasons to lean in one financial direction versus the other.
“Financial choices can seem daunting sometimes, right?” said James Francis, CEO at Paradigm Asset Management. “On the most effective hand, that mountain of debt is overwhelming.” But, he added, you might want to save for your children: “A better education, opportunities, possibly even helping them buy their first home one day. So what’s the smart choice to make? Pay off debt or keep coins on your kids?”
GOBankingRates asked Francis and other experts to give their take on whether you should pay off debt or save money for your kids’ future.
Team Debt Repayment
“There’s a few aspects very satisfactory about paying off debt,” Francis said. “Getting rid of immoderate-interest loans — collectively with credit score rating cards — can take a huge weight off your shoulders.”
Elizabeth Ralph, a high-level wealth strategist and intuitive investor at The Spiritual Investor, recommended that someone in this position put on their own safety mask first.
“Kids have time and energy, and they can take out loans for college,” explained Ralph. “But you can’t take a loan for retirement. If you focus all your efforts trying to fund their future, you may end up relying on them for support later.”
Francis added, “Plus, as quickly as the debt is paid off, you’ve been given more money to spend on the subjects that matter.”
Team Save for Kids’ Future
On the other hand, Francis said, “Investing in a college fund early in life can be a tremendous gift for [your kids] later. A complex hobby … can almost turn artwork to your favor.”
Joseph Camberato, the CEO at National Business Capital, recommended not waiting until you’re completely debt-free to start saving.
“So many people think they need to be in the ‘perfect’ financial position before they invest,” explained Camberato. “That’s a mistake. Even if it’s just $20, $50 or $100 a month, start now. Time is your biggest advantage. Start small, stay consistent, stay disciplined and get invested while you pay down debt.”
Best Plan of Action
Francis pointed out that with this question, the answer really comes down to it being all about balance.
“Pay off immoderate interest debts first; they may be like coin-ingesting monsters,” he said. Once your debt is under control, he added, start saving alongside your debt payments.
Gina Knox, CEO and financial coach at Gina Knox Coaching, agreed. “Debt payoff is a good idea, of course, especially a high interest debt, like credit cards. But, if you are not investing in your child’s future, then you are missing out on the key amount of time, with them being this young. Even if you can only contribute $100 a year, this can really grow in the time until they are at retirement age! This can grow so much for them.”
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