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Mom Pays Son’s Debt: Should You Consider Paying Your Child’s Debt?

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<p>Most of us have heard a story about a mother, father, or family members stepping forward and paying someone’s debt. When it comes down to it, reading a title such as “mom pays son’s debt” can be pretty disheartening. Why not give your child the tools to better their finances on their own, a strategy that will undoubtedly help them for years to come.</p>::Pexels

Mom Pays Son’s Debt: Should You Consider Paying Your Child’s Debt?

When faced with the reality of your child struggling with debt, many parents feel the urge to step in and help. But is paying off your child’s debt the right move? While it can provide immediate relief for your child, it’s important to weigh the long-term benefits and drawbacks of this decision. Here’s a look at both sides, including some 2024 financial debt trends and the potential dangers your child may face if they’re overwhelmed by debt.

 

Benefits of Paying Your Child’s Debt

  1. Immediate Relief from Financial Strain One of the most obvious benefits of paying off your child’s debt is the immediate relief it provides. Financial stress can take a toll on your child’s well-being, causing anxiety and affecting their ability to manage their day-to-day responsibilities. By offering financial help, you give your child space to focus on improving their situation without the constant pressure of debt.
  2. Teaching Financial Responsibility Paying your child’s debt can be a valuable teaching opportunity. When done thoughtfully, you can use this moment to help your child better understand financial responsibility. Set clear expectations for budgeting and managing money in the future, ensuring they avoid repeating the same mistakes that led to debt.
  3. Protecting Your Child’s Credit Score If your child is struggling with overdue bills or high-interest payments, their credit score can suffer. In 2024, credit reports are increasingly being used not only for loans but also for rental applications and even job prospects. Protecting your child’s credit score by helping with debt can ensure they have a better chance at future financial opportunities.
  4. Strengthening Family Bonds Offering financial support can reinforce family financial support and show your child that they can count on you during tough times. This can strengthen your relationship and foster open communication about money, creating a healthier dynamic when it comes to discussing finances.

Drawbacks of Paying Your Child’s Debt

  1. Risk of Enabling Poor Financial Habits While paying off your child’s debt may provide temporary relief, it could also reinforce poor financial habits. If your child knows that they can rely on you to bail them out, they may continue to make irresponsible financial decisions. This can lead to a cycle where they fail to learn financial lessons and continue to rely on you for help.
  2. Strain on Your Own Finances Paying off debt, especially if it’s significant, can place a strain on your own finances. It’s essential to consider whether you can afford to help without sacrificing your own financial security. Family money matters, and jeopardizing your own financial well-being could affect your future stability and retirement plans.
  3. Missed Opportunity for Growth Struggling with debt can be a powerful learning experience. Your child may need to go through the process of debt repayment on their own to fully grasp the consequences of their actions. Bailing them out may rob them of the chance to develop resilience, responsibility, and problem-solving skills.
  4. Creating Dependency Offering too much financial help can lead to a sense of dependency, where your child may expect you to step in every time they face a financial challenge. It’s important to find a balance between helping and encouraging your child to take ownership of their financial responsibilities.

2024 Debt and Credit Statistics for Young Adults

 

In 2024, young adults in their 20s and 30s are carrying a significant amount of debt, primarily due to student loans and credit cards. According to recent statistics:

  • The average credit card debt for young adults under 30 is approximately $4,200.
  • Around 1 in 5 young adults have a credit score below 600, classifying them as subprime borrowers.
  • The total student loan debt in the U.S. has exceeded $1.8 trillion, with the average borrower owing nearly $37,000.

With inflation and rising living costs, many young adults are resorting to credit cards to cover basic expenses, which only increases their financial burden. These numbers highlight the significant challenges young adults face when trying to manage their debt, which can put them in dangerous financial situations if left unchecked.

Extreme and Dangerous Measures to Pay Off Debt

For some young adults, overwhelming debt leads to extreme actions. Here are some risky behaviors that could result from a desperate attempt to eliminate debt:

  1. Taking High-Interest Payday Loans
    In an effort to pay off credit card debt or student loans, some young adults resort to payday loans. These loans often come with interest rates exceeding 400%, trapping borrowers in a vicious cycle of debt that’s nearly impossible to escape.
  2. Participating in Risky Investments
    Desperate to make quick money, some young adults turn to speculative investments, such as cryptocurrency or day trading. While these strategies promise quick returns, they can also lead to significant losses, further worsening their financial situation.
  3. Selling Personal Belongings
    Another extreme measure includes selling valuable possessions, such as electronics, jewelry, or even cars, to pay off debt. While this may provide short-term relief, it can negatively impact their quality of life and create additional stress.
  4. Undertaking Multiple Jobs or Gig Work
    In a bid to make extra cash, many young adults take on multiple jobs or participate in gig economy work. While this can help them manage debt, the long hours and physical toll can lead to burnout, affecting their mental and physical health.
  5. Risky Personal Loans from Friends or Family
    Some may seek personal loans from friends or family members, risking relationships if they’re unable to repay. This can create long-lasting tension within families, and borrowing money can sometimes become a pattern of dependency.

Finding a Middle Ground

If you’re on the fence about whether to pay off your child’s debt, consider alternatives that offer support without full financial rescue:

  • Debt Repayment Advice: Guide your child through creating a budget or negotiating with creditors. This way, you offer support without paying their debt directly.
  • Set Conditions: If you decide to help financially, set clear conditions. For example, you could require that they take a financial education course or stick to a strict budget.
  • Help in Smaller Ways: Instead of paying the entire debt, consider offering a partial payment or assisting with a specific debt, such as a high-interest loan.

Conclusion

Deciding whether to pay your child’s debt is a deeply personal choice that depends on your financial situation, your child’s habits, and your family dynamics. While parental financial help can offer immediate benefits, it’s essential to consider the long-term impact on both your finances and your child’s financial independence. Striking the right balance between supporting your child and fostering their financial responsibility is key to helping them succeed in the future.

How Brian Paid Off $30,000 in Student Loan Debt His First Year Out of College

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<p>Any time someone chooses to seek debt freedom and succeeds in it is amazing to me. Dave Ramsey’s “debt-free scream” is always a heart-warming celebration to see online and speaking to people who have paid off debt always inspires me. Brian Meiggs’ story is yet another inspiration. He took the time to participate in a quick Q&A to share how he paid off $30,000 in student loan debt.</p>::Pexels

Any time someone chooses to seek debt freedom and succeeds in it is amazing to me. Dave Ramsey’s “debt-free scream” is always a heart-warming celebration to see online and speaking to people who have paid off debt always inspires me. Brian Meiggs’ story is yet another inspiration. He took the time to participate in a quick Q&A to share how he paid off $30,000 in student loan debt.

How He Paid Off $30,000 in Student Loan Debt

When it comes down to it, Brian was able to pay off his student loan debt by pure determination. When he graduated, that was his sole focus. He did not want that debt to have a hold over him for 10+ years, as it does with so many other graduates. Here is how Brian Meiggs got started on his journey and led him to debt freedom.

<p>A: My name is Brian Meiggs and I’m an entrepreneur who spends most of my time building finance-niched websites from the ground up and making them profitable. Some of my recent projects include My Millennial Guide, Saving Junkie, and SavingExpert.</p>::PexelsQ: Tell me a little about yourself. What inspired you to seek financial freedom?

A: My name is Brian Meiggs and I’m an entrepreneur who spends most of my time building finance-niched websites from the ground up and making them profitable. Some of my recent projects include My Millennial Guide, Saving Junkie, and SavingExpert.

I’ve always been a hustler. In college, I bought used iPhones and flipped them for a profit. I had a few corporate finance jobs after college, but I found myself bored and without a purpose. I knew I didn’t want to work a 9-5 until I retired so I looked for a way out. I started a blog and eventually, it took off, and now I do it full-time. I enjoy every moment of it and the freedom it brings.

Q:  How much debt have you paid off?

A: I graduated from college with around $30,000 in student loan debt. Being a 23-year-old, that is a lot of money. I spent so much time building a rock-solid budget and maximizing my income in order to tackle this debt. I paid off all of my student loans within one year of graduating college. It was so liberating.

Q: How long had it taken to get to where you are financially?

A: It definitely took me a while to start making my desired income. I thought back and reflected, “man, I’m really doing it!” What helped me reach my income goals was looking at other bloggers who were making anywhere from $10,000 to $30,000 per month. I figured if they could do it, why can’t I?

It wasn’t until my 3rd year of blogging that I felt comfortable with quitting my day job. I was working as a Credit Risk Manager making around $85,000 per year. Once the income from my blog was making me more money per month than my job, I felt comfortable quitting.

I have a funny quitting story, but that’s for another time. Now, I’m making more than six figures per year with all my websites. I simply enjoy the financial independence and not the money itself.

Q: What was the key to your success?

A: My success came from looking at other bloggers who were successful and trying to make my website better. I’m at a tipping point where if I really want to grow, I’m going to have to hire a full-team to help with management. I really enjoy running everything myself but if I want to continue to grow, this needs to happen.

Q: What is the most important part of your finances?

A: The most important part of my finances is continuing to maintain the lifestyle I am currently living. I’m not opposed to splurging on things that I want or saving every penny. I recently purchased my dream exotic car (BMW i8) and I have no regrets about it.

Q: How do you stay debt-free now?

A:  Staying debt-free is done successfully by spending less, finding additional sources of revenue and scaling that up, and having a budget that I actually follow.

Q: What is something you wish you could tell your younger self about money?

A: Money is passive. It comes and goes and while it can make you temporarily happy, creating memories and experiences whether solo or with friends and family, that’s more valuable.

Q: What is your favorite quote?

A: “The root of joy is gratefulness”  – Brother David Stiendl-Rast

Q: Is there anything you would like to leave readers with?

A:  I just wanted to thank you for reading my story and learning a bit about me. I would say the best way to invest is in yourself. Never stop learning or teaching yourself new skills. Every day you should be better than the day before. What do you want in life? Go out and get it. Perseverance is failing 19 times and succeeding the 20th. 

Closing Thoughts

Looking at the success in Brian’s story and how he paid off $30,000 in student loan debt, I thought to myself, “Man, I wish I had done that!” Could you imagine starting out your adult life with absolutely no debt? Hopefully, sharing his story inspires other young people to consider doing the same or taking similar approaches to pay off debt and focus on financial freedom.

Readers, what do you think about Brian’s story? How would paying your student debt off immediately impacted your finances? Was it ever a possibility? 

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Is the Secret to Growing the Economy Canceling Student Loan Debt?

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The United States economy has seen better days, that’s no doubt. The stock market recently saw one of its worst trading days in recent history. Many economists have been debating what could help mend the current climate. Could the secret be forgiving student loan debt?

A recent report says yes. The easiest way to ease the pressure being felt by more than 44 million Americans is to forgive all student debt. (And I’m not just saying that because I’ve got about $24K in student loans…)

A group of economists at the Levy Economics Institute of Bard College found there could be some great benefits if the federal government were to forgive student debt. The report details how young people struggling to pay off a massive amount of debt from college will help the economy as a whole.

While it may sound like a fantasy, it is possible, and it could have a significant and positive economic impact. The report found that canceling all student debt could potentially lead to an increase in U.S. GDP (gross domestic product). How big of an increase, you ask? Economists predict the increase could land anywhere between $861 billion and $1,083 billion over the next 10 years.

In addition to increasing the GDP, economists predict that canceling student debt would also lead to an increase in new jobs (an estimated 1.18 to 1.55 million).

Why is Canceling Student Loan Debt Such a Big Deal?

Why would forgiving student loan debt have that kind of impact on the United States economy? Well, the answer is pretty simple. There are more than 44 million Americans with some type of student loan debt hanging over their heads. Giving 44 million Americans a clean slate, where student debt is concerned, could help the economy greatly. The collective student loan debt in the U.S. is $1.3 trillion, which is higher than credit card debt and auto loan debt held in the U.S.

Who Would Pay the Student Loan Debt?

If the federal government decided to go about canceling student loan debt, it wouldn’t be that difficult. The problem, economists seem to believe, is that government officials consider paying the student loan debt as a zero-sum game. However, canceling student loan debt will free up tons of money to be put back into the economy.

Lawmakers have been able to provide massive tax cuts, and canceling student loan debt would be about the same. In fact, they’d be spending nearly the same amount of money to do so. Economists also found that canceling the debt could also help alleviate poverty.

As you probably know, poverty tends to be a cycle. Generally, people who grow up in poverty tend to live in poverty as adults. However, many people attempt to break the cycle of poverty by going to college. Canceling student loan debt could help ease racial disparities in debt and education. Canceling student debt would help keep borrowing/loans from continuing to support the racial wealth gap between the number of people in the U.S. looking for career opportunities and better employment through higher education.

Final Thoughts

It is your typical millennial response to be like, “Oh yeah. Cancel all the student debt.” However, it could make a significant impact on the economy. Taking into consideration my own student loan debt, I know it would free up $275 a month (more than $3,000 a year). Of course, some of that would go into savings, but a lot of it would also go back into the economy. (In fact, there are things I know I could buy with that money).

So, what do you think about canceling student loan debt? Would it help you? Do you think it’ll help the economy? Let me know in the comments! 

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Which Debt is Worse: Student Loans or Credit Cards?

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<p>If you've ever been in debt you know that not all debt is created equal. While all debts owed should be paid off, there is a way that you should prioritize your debts so that you're able to pay them off in the most sufficient manner. So, which debt is worse? Student loans or credit cards? How do you pay off your debt in a way that makes sense?</p>::Pexels
If you’ve ever been in debt you know that not all debt is created equal. While all debts owed should be paid off, there is a way that you should prioritize your debts so that you’re able to pay them off in the most sufficient manner. So, which debt is worse? Student loans or credit cards? How do you pay off your debt in a way that makes sense?

Which Debt is Worse?

When it comes down to which debt is worse (student loans or credit cards) there is no black-and-white answer. No matter what you should be sure to remain current on all of your payments. The only time the question “which debt is worse” comes into play is when you are looking to pay it off. If this is the case you will want to jump on paying off your credit card debt before your student loans (while continuing to remain current on your student loan payment installments).

Credit card debt is generally high interest. It will also have the bigger impact on your credit score and finances in the long run. To truly understand why you should tackle credit card debt before student loan debt you need to understand how your debt works.

Understanding Your Debt

Before you decide which debts you should pay when you should fully understand your debt. Sticking to the “student loans vs. credit cards” topic of discussion, you can break down each debt into parts. When you look at your student loans, for instance, most loan companies provide a breakdown of payment towards interest and payment towards the loan itself.

For student loans you’ll be paying between 3 and 5 percent interest (closer to 7 percent if you are paying off graduate loans). If you have multiple student loans then you have to contend with multiple interest rates which is why many institutions will consolidate student loans in most situations. Interest rates on credit cards, however, are much steeper. The average credit card interest rate sits around 20 percent (four times as much or more than student loans). Because of this, you’ll want to pay off your credit card faster than the student loan debt.

How to Prioritize Paying Off Your Debt

There’s not really anything such as “good debt” but not all debt was created equal, which means each type of debt should be prioritized. Here’s how you should tackle your debt:

  • Pay off any debts prohibiting you from living your life. If there is a debt significantly impacting your life, pay it off. For instance, if there is a debt you owe to a rental agency that is making it impossible for you to rent a home you’ll want to pay that off quickly. If an old checking account and hurting your banking, try a bank account without chexsystems until you’re back on your feet.
  • Next, pay off debts with high interest rates. Target the debt that is accruing the highest amount of interest. If you pay this off quicker you’ll pass less over time. Pay off credit cards and other high interest debts before tackling others.
  • Make payments on the interest if you can. Many loan companies offer the option to pay additional money on the interest. You can do this with mortgages as well. Be sure that you know that your payment is going towards the interest though (and not to the loan itself).
  • Pay off the debts that are costing you the most. Once again, all debt is bad but some debt costs you more than others. If you want to get rid of your car payment, for instance, put in some extra work to get it paid off and have that extra cash in your pocket every month.
  • Tackle other debts. Once you’ve taken care of the bigger, more expensive debts in your life, tackle everything else. You can begin paying off the other items aggressively or simply pay them on a regular schedule to help improve your credit.

No matter what your approach may be to paying off debt, understanding your debt and interest rates is an important part of becoming debt free. Have you ever had to tackle a significant amount of debt? What did you do?

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Photo: The Balance