Debt Free or Financial Freedom

by Marcus L. Wilson
[email protected]
Owner, Wilson Wealth Fund. A successful financial advisor and investment manager located in Charlotte, NC, he is a board member of the Black College Sports & Education Foundation. 

Every year American families throw away the opportunity to enrich their children by ensuring that they don’t graduate with student loans.  With most colleges costing between $50,000 – $100,000 for a 4-year stint a family would have to save a small fortune to prevent their children from carrying student loan debt into adulthood.  It’s understandable to want your child to be debt free as they enter the world, but it’s important to also consider the potential growth of such a large sum of money over the course of your child’s life.
You see what most parents fail to realize is that the money they spend paying off their child’s student loans is the very source of investment capital that could ensure their children achieve financial freedom earlier in life.

Consider that with a few simple steps most investments will double every 8 to 10 years in the stock market.  This means that a $50,000 investment at age 22 would grow to nearly half a million by 50.  Likewise, a $100,000 investment at the same age would grow to nearly a million.  How many 50-year-olds would love to have an extra half a million dollar or more in their possession?It’s important to stop and consider what you get when you pay off debt.

Yes, you are debt free for a while, but eventually, you get into more debt.  Here’s why.  Lenders consider customers who pay their debt off early to be their best customers.  As such they want to lend them more money.  You’re a good customer who pays them back regularly, so why wouldn’t they give you more options to borrow more money?  Lenders know that the quicker you pay off debt, the quicker you get back into debt.  It’s a vicious cycle.

Notice that I didn’t say that you achieve financial freedom when you pay off your debt?  This is because financial freedom comes from having enough money to provide for your needs and wants.  If you’ve used all your capital to pay-off debt without growing wealth – then you are simply debt free with little to no money.

Instead of paying off your child’s student loans before or shortly after they graduate, opt for a minimum payment plan and use the difference to invest aggressively in the stock market.  Yes, they will have debt longer, but they’ll have a greater chance of achieving financial freedom in the future.

Would you rather give your kid a million dollars or pay off their student loans early?
By delaying early debt pay-off, you can help ensure your child is a millionaire by the time they reach their 50s and 60s.

See More: The Crazy Amount America Spends on Higher Education

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