An insurance salesman told me it’s better to use a life insurance policy for college savings rather than a 529 plan because the child can use it for anything instead of just college. Is that true?
Of course that’s what he told you. He’s an insurance salesman.
He was right on one point. If the kid doesn’t go to college, the savings inside an insurance policy can be used for anything. But here’s the catch: There won’t be much waiting for you, because you saved it within the constraints of a life insurance policy. The returns stink. Savings through a life insurance policy won’t get you anywhere near the cash you’d have by investing in a 529 plan.
If you’re going to save for your kids’ college fund, there needs to be lots of talk around the house about actually going to college. It’s not really brainwashing them so much as it’s letting them know the importance of a good education. And they need to know, on no uncertain terms, that the money you’re saving for them is for one thing: college.
What you experienced, Rusty, was an insurance salesman trying to sell insurance. Stay away from it when it comes to saving for college.
Is it a good idea to sell your car in order to get one that gets better gas mileage?
Only if the other car is really cheap, or cheaper than the one you’re selling. I think it’s funny when people run out and upgrade from their $7,000 car to a $30,000 Prius to save gas. Think about it. That’s an extra expenditure of $23,000 to save gas. Where are you planning on driving, to the moon?
Actually saving money is a much better plan than some of the ideas people dream up in the name of saving money. When it comes to things like this, you need to sit down and do the math. Crunch some hard, cold figures and see what happens. “Well, if we got this kind of gas mileage, instead of what we’re getting now, how much money would we save?” But if you spend $5,000 more to save $50, it will take far too long to get back the money you’ve already spent.
Getting better gas mileage is a good thing, but I wouldn’t recommend spending any more than the value of the car you’re currently driving to make it happen. Moving down in car but up in mileage is a great plan. If you do that, you’ll really start making headway with your money.
Dave Ramsey has written four New York Times best-selling books: “Financial Peace”, “More Than Enough”, “The Total Money Makeover” and “EntreLeadership”. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the Web at daveramsey.com.