Q We've just paid off all of our debt except mortgage-related (have great rate for primary fixed mortgage and a reasonable fixed home equity loan). We are leaving our credit card accounts open but aren't using them except for emergencies. We desperately need a new car. We could pay for it with cash from liquid funds, or we could finance it very reasonably from a credit union or USAA. Would it be good for us to have some non-home-related debt? Or should we aim to have as little debt as possible and pay cash? We do have reserves in case of unemployment but are behind on the 14-year-old's college fund.

SARA, GOLDEN VALLEY

A From your e-mail it's clear you're good with money. So, if I recommend borrowing to buy the car, I'm comfortable I'm not creating a problem for the future.

I understand your reluctance to take on debt again. Debt is rightly an anathema to most people, and normally I would say use cash. Still, I think you should seriously consider borrowing to buy your car.

Here's my reasoning:

The economy is in shambles. The unemployment rate is soaring, and any turnaround in the economy seems far off. Savings are critical in this economic environment.

Star Tribune, Star Tribune
Chris Farrell

By borrowing -- using Other People's Money -- you maintain your financial flexibility. Your pot of emergency savings remains full, and you can continue to add to it. A couple of months to a year or so from now, you can always decide to pay off the loan if you've socked away enough money, if you start enjoying greater job security, or if employers begin posting helped-wanted signs.

The auto industry is reeling, so you should get a good deal. Make sure there isn't a prepayment penalty on the loan so that you can pay it off early without forking out extra fees (there usually isn't, but ask just in case).

One other thing: There's a season to all money management goals. It's wonderful that you want to save for your child's college education, but other financial goals should take priority for a bit longer.

Chris Farrell is economics editor for American Public Media's "Marketplace Money." Send questions to cfarrell@ mpr.org.