Tuesday, June 12, 2012

My 12 Year Old Really Hates Debt

9:35 AM  ,  17 comments

debt
 Alan Cleaver's photos on flickr
A few months ago, my twelve year old son borrowed $300 from us.  It wasn't for a new cell phone or a new iPod.  It was for a field trip to Orlando.  Yup...quite possibly the world's greatest field trip!  His sixth grade class went to Epcot and Sea World and he really, really, really wanted to go.  As much as I wanted to just hand over the money and make him happy, the reality is that with four kids (one of whom is starting college this fall), our family budget doesn't have room for optional, $300 field trips.  So...we told him that he could borrow the money from us as long as he agreed to pay it back.  You can read about his loan plan here.

This is not the first time we have loaned money to our kids.  Our older son went on this same field trip when he was in sixth grade and he repaid the money.  Our daughter borrowed money for some of her school trips and paid her loans back over time as well.  However, this is the first time I have blogged about it and publicly discussed it.  The blogging comments were all positive, but I did get some questions and raised eyebrows from friends and family.  I even got the question, "Are you really going to make him pay you back?  He's just 12."  Ummm....yes.  We worked out a plan and he agreed to it.

The results of our loan arrangement:



  • He loved the trip.  He is still talking about how fabulous it was.  I have asked him several times if it was worth $300 and the answer is always, "YES!"
  • He hasn't asked us to forget about the loan.  He hasn't whined or complained having to pay us back.  I think that helping him create a plan ahead of time has been critical.  He knew what he was getting into and helped design the repayment plan.
  • He is honoring his commitment.  He has paid off $250 of the debt in the past three months and only has $50 left until he is debt free.  His goal is to have it paid off by July 1st.  Where has he gotten the money?
    • Allowance:  He gets $5 per week and has used every bit of it toward his debt.
    • Birthday:  He asked for money instead of presents.  Again, it was his choice.
    • Extra jobs:  He asks for extra jobs around the house to earn money.  He has washed cars and steam cleaned the dining room chairs.
    • Hidden money:  He has cleaned out his desk drawers and under his bed looking for quarters and dimes that are hiding.  He has become much more careful about taking care of his cash.
And, finally...
    Epcot
    from halseike's photos on flickr
  • He has learned that he does not like debt.  We were in Target several weeks ago and he told me that being in debt was no fun.  He went on to say that he doesn't like feeling like he owes somebody and that looking at the new toys was boring because "what good does it do when I know I can't buy anything because I have no money."  He also mentioned that he hates seeing the negative sign next to his account balance.
The interesting thing is that I offered to let him keep some of his birthday money and allowance money so that he would have some cash.  He didn't want to do that.  He wants this loan to be over and done!

The Orlando field trip has been a wonderful learning experience for him.  He went on the "coolest field trip ever", has learned about budgeting and loan repayment and has developed confidence that he can accomplish big goals.

Have you ever loaned money to your child?  What was your experience like?





17 comments:

  1. Jacob @ iHeartBudgetsJune 12, 2012 at 1:40 PM

    Hah! Though I don't know if I could loan my kids the money (haven't decided on that yet), I do love the lesson learned. It's great that he now knows that debt is incomfortable and stressful, so hopefully he doesn't get into debt in the future with someone who is not as nice as you!

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    1. Pam at MoneyTrailJune 12, 2012 at 1:52 PM

      I must admit...loaning him that amount of money caused me some apprehension. It's a little different from floating them a $10 loan!

      Funny note about niceness: my 15 year old just borrowed some cash from my 9 year old. The 9 year old asked me if he could charge his brother interest. Guess he's not as nice as his mom! Or, he's a budding business man!

      Delete
  2. Rianka @ Golden Financial NuggetsJune 12, 2012 at 8:11 PM

    Pam, I love this post.

    Children earning money instead of just giving it to them, I think, is a very important life lesson. Learning the value of a dollar early in life is invaluable!

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  3. MyMoneyDesignJune 12, 2012 at 9:48 PM

    Wow, that is pretty responsible for a 12 year old! And a great lesson you have taught him. It's better he figures this out now rather than when he gets his first credit card in college :)

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    1. Pam at MoneyTrailJune 12, 2012 at 10:27 PM

      Absolutely! It's just like riding a bike --- they have to practice to become skilled! It's much better while they are young and the consequences are minor.

      Delete
  4. The College InvestorJune 12, 2012 at 11:22 PM

    Wow, really interesting. I had to earn money with my allowance, but I never think my parents would have held back for a field trip. I think it is a great way to teach responsibility.

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    1. Pam at MoneyTrailJune 13, 2012 at 7:59 PM

      It was really hard for me to hold back. My first instinct was to forget the budget and write a check. I didn't want him to miss anything. However, it's those emotional decisions that can cause havoc with a budget.

      Delete
  5. Marissa @thirtysixmonthsJune 13, 2012 at 1:18 AM

    You have the greatest kid ever. You should be very proud.

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    1. Pam at MoneyTrailJune 13, 2012 at 8:00 PM

      Awwww...thanks. He's a good kid. Now, if I can just get him to quit complaining about taking a shower!

      Delete
  6. Kurt @ Money CounselorJune 13, 2012 at 11:34 AM

    I admire your son's creativity and tenacity when it comes to working toward debt freedom! Seems clear that the $300 debt made him uncomfortable. I bet he's fascinated by earning interest (well, at least he would be if rates were above zero) on his savings too. He'll do well.

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    1. Pam at MoneyTrailJune 13, 2012 at 8:02 PM

      Out of our four kids, this little guy may well be our business/entrepreneur person. It's fun to watch the different personalities and how they tackle problems.

      Delete
  7. Deborah @ImpulseSaveJune 13, 2012 at 12:10 PM

    I think this is great! My parents have done similar things with us, and they have even borrowed money from the kids on occasion. It's a great way to learn about loans and the feeling of debt without the huge consequences yet. Good for you!

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    1. Pam at MoneyTrailJune 13, 2012 at 8:03 PM

      I have had to borrow cash from my kids occasionally. Glad they don't charge me interest!

      Delete
  8. Thad P @ thadthoughts.comJune 16, 2012 at 10:21 AM

    This may well be the best post I have ever read from you Pam. I love it! Your son is learning outstanding lessons (sounds like all your kids have) about money and life.

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    1. Pam at MoneyTrailJune 16, 2012 at 10:26 AM

      Wow, Thad, what a great compliment! Thank you so much!

      Delete
  9. Lead to ImpactJune 29, 2012 at 9:38 AM

    Pam, this was truly a great post. It was a real eye opener to me. This was a great educational lesson on debt. It was good to teach him about the drain of debt at a young age. He will grow up hating debt. I loved this. I will be using this on my 15 year old.

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