I have a small inheritance of approximately $80,000 that I set aside for my daughter’s education. We have accrued credit card debt of approximately $40,000. Would it be wise to pay off the credit card debt with the inheritance and try to recover the loss by saving or investing the remainder of the inheritance? Or should we try to pay off the credit card debt with monthly payments and leave the inheritance alone?
“One thing you do not mention is the age of your daughter,” said FPA member Jim Heisler, CFP®. “The older she is the more you want to keep in the college savings fund. I do not think you can look at this issue in a silo of just your daughter's college education. The impact of carrying that much credit card debt is huge, especially due to the high interest rates that I am assuming come with it. I am a fan of getting rid of and steering clear of credit card debt. I have seen it be the financial death of people. Having $40k plus whatever you are able to save would still represent a solid down payment on your daughter's education. If you left the inheritance alone, then you would have consider whether or not to refinance your home to help lower your interest cost on your credit cards.”