Author Topic: Quick Q: Pay preschool in a lump or as monthly payments?  (Read 1606 times)

Poundwise

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Quick Q: Pay preschool in a lump or as monthly payments?
« on: January 26, 2017, 07:19:23 AM »
Well, Baby Poundwise is almost ready for the big time!  I've signed her up for half day preschool in the fall at a great co-op.

The cost will be tremendous, but we have budgeted for it. It will be a squeeze given our other savings goals, but we'll make up the amount by not putting our other kids in so much camp this summer,  and anyway I expect that I will use the free time effectively so in the end it will be a net gain for the family.

My question is simple:  We are given the option to prepay $5250 now, or we can split it into monthly payments of $525, Mar-Dec 2015, except for two months which will be $1750 each. There is no penalty for splitting the payments, except for a late payment of $10 if you pay after the 5th of the month. 

So, it seems to me that the best thing to do is to choose the split option, on the assumption that I can still earn interest or gains if I hang on to my money longer.   Can anybody think of a reason why I should pay it in a lump sum instead?

NoStacheOhio

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Re: Quick Q: Pay preschool in a lump or as monthly payments?
« Reply #1 on: January 26, 2017, 07:21:08 AM »
Only reason to lump-sum it would be to get a discount. Make sure you hang on to your receipts, child care is tax deductible (up to a limit).

historienne

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Re: Quick Q: Pay preschool in a lump or as monthly payments?
« Reply #2 on: January 26, 2017, 07:45:01 AM »
Another risk of the lump sum payment: if your daycare shuts abruptly, you won't get that money back.  Unlikely, but has happened to a friend of mine.  She was getting a discount for the prepayment, but ended up losing thousands of dollars because the school shut halfway through the year and she never got a refund.

NeonPegasus

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Re: Quick Q: Pay preschool in a lump or as monthly payments?
« Reply #3 on: January 26, 2017, 08:26:21 AM »
Monthly payments. If you have an unexpected financial hardship and need to withdraw, it'll be a lot easier if you aren't having to fight to get prepaid money back.

SKL-HOU

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Re: Quick Q: Pay preschool in a lump or as monthly payments?
« Reply #4 on: January 26, 2017, 09:44:47 AM »
Things change. I would not prepay. I have done this before. I ended up moving to a different state and luckily the owner of the daycare felt bad enough to refund me but she did not do the same for another parent. You may end up not liking the daycare. Anything can happen. Do not prepay even if it will cost a little extra (which isn't the case here).

GuitarStv

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Re: Quick Q: Pay preschool in a lump or as monthly payments?
« Reply #5 on: January 26, 2017, 09:49:39 AM »
Monthly payments are safer (in case of a problem with the daycare), and will cost you less (because your money is invested for longer).  Seems like a no-brainer.

MsPeacock

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Re: Quick Q: Pay preschool in a lump or as monthly payments?
« Reply #6 on: January 26, 2017, 09:57:04 AM »
Definitely monthly payments - if there is any change in circumstance you'll want to be able to stop paying, not have to fight to get payments back.

Poundwise

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Re: Quick Q: Pay preschool in a lump or as monthly payments?
« Reply #7 on: January 26, 2017, 10:19:57 AM »
Thanks everyone!  These are all good points... didn't think about the early withdrawal reason.  There is absolutely no incentive to pay the lump sum since they offer no discount. Actually, it's good I asked this question because it made me look closer at the contract, and I caught that they made a mistake... the payment should be $525 each and every month, otherwise I will be paying $1575 too much!  I'm perfectly capable of having just blindly paid that extra money according to their schedule. Have contacted the office to get it corrected.

With respect to getting refunds if we withdraw early, there's only so much I can do since it is all prepaid to some extent. Contract says, "If I withdraw my child on or before Jan 31, 2018, written notice must be received by the School at least 30 days prior to the date of withdrawal. If 30 days notice is not received by the School prior to withdrawal, I will be responsible for additional 30 days tuition. Prepaid tuition, excluding the $750 registration fee, and any tuition due pursuant to this paragraph, will be credited to me. If I withdraw my child after Jan 31, 2018, no portion of prepaid tuition will be refunded to me."

However, I guess the split payment could be useful under the unlikely case that they kick my daughter out in the fall for being disruptive, and there is a disagreement over how much refund I am owed, etc.

Fortunately this place has been in business for decades, and has a tremendous waiting list so I think there is little chance it will go belly up.