Kids college fund or pay car off

[LifewithSage]

Okay, I'm in need of some advice.  DH and I have very little debt;  our mortgage and a car note and that's it.  We can afford the car not on a monthly basis, but the interest rate is 4.9%, which is what is causing me problems.  We have a college fund for our kiddos that is still in a liquid savings account and has not been invested into any college savings vehicle.  So, there wouldn't be any sort of penalty to take the money out.  We currently have ~$52k in there for our two boys (and a third baby due in April).  The boys are 3.8 and 21 months.  Lately, I've been thinking about taking the $14k we owe on the car note out of their college account and paying off the car.  The money isn't really earning any interest, less than 1% and we're paying all this interest on the note.  It just seems so wrong though to take the money from them.  Although, it would free up about $400/month that we could put back into their college fund.... IDK, I'm so torn. 

[Madalyn]

Honestly I would pay off the car. Then that 400 could go straight to their account instead of the car where a good bit of it would be wasted on interest and not actually paying off the car price. If you started putting the 400 into their account after the car was paid off you'd replace what you took in three years and considering how much you already have in there I'm guessing you already put a nice chunk aside to it so probably less than that. I mean if you were wanting to pay off a 30k car I probably wouldn't do it. 14k doesn't seem bad to me in comparison to how much you already have in there and how it will benefit you having that 'debt' paid off and no interest in the long run.

[tinuviel_k]

I agree: pay off the car. Your children are so young and you have quite a college nest egg there already. It sounds logical and responsible to get rid of the debt, save yourself the interest payments, and re-invest your auto-loan money back into their college savings. It will take less than three years to put it all back if you commit to paying $400 a month into their college savings.

[lookatreestar]

i'd pay off the car note in a heart beat.