When I started this post a couple years ago, it was going to be talking about how awesome pre-payment discounts were.
I was going to talk about how you get 5-10% off just by paying everything in advance, but the real benefit was that you didn’t have to remember to write a check every month. An additional benefit (for some people) was that you tended to feel a little poorer when you paid out one lump sum and that helps moderate spending.
Since then, I’ve discovered the main danger of pre-payment.
DC2’s daycare, which DC1 went to for many years, suddenly and without warning disintegrated. A former worker emptied out the bank account prior to the electric bill or payroll being paid out. The management handled it terribly, waiting until the lack of funds became dire and unfixable. All but 3 daycare workers quit. Mass exodus from the students.
We prepaid $8000 for the year. We’re out around $4500. The director swears she’ll get us the money back once the bank refills the account (since they weren’t supposed to let that person take the money out), but it looks exceedingly less likely that that’s going to happen. It looks more likely that the school is going to declare bankruptcy, and people with unfilled orders come last in the repaying of debts in bankruptcy cases.
Was that worth saving 5%? No. We’re wishing we’d just paid monthly. But in May when we signed up, everything still looked fine. The school has been around for a couple of decades. We had no reason to believe that something like this could happen, and could happen so suddenly and without warning. We thought that if we left the school it would be because we didn’t like a teacher or something (unlikely, because they have great training and we’ve always been able to work with the director in the past), and it would at least be our choice.
We’re still prepaying DC1’s private school. That’s a non-profit and they can fund-raise through donations. I guess since they survived the last drama, we didn’t learn any lessons there. Also we sort of think of that prepayment as a donation itself.
So…. bottom line, think really hard about what you would lose if the company went out of business before you take advantage of a pre-payment discount.
Have you ever been burned by pre-paying?