Child's Debt Consolidation

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Mettaman
Posts: 9
Joined: Sat Jun 27, 2015 12:31 pm

Child's Debt Consolidation

Postby Mettaman » Fri Apr 21, 2017 7:33 am

Hi! My daughter works for a non-profit food bank. Her salary is low and she has rung up a $7K credit card debt over 2 years to cover some living expenses. She has an emergency fund that can pay off the debt. She's gotten a roommate which will help lower the apartment rent so she can stop using the credit card for living expenses.

I've told my daughter to pay off the credit card from her emergency fund and stop paying the exorbitant interest. She's been enticed to transfer the balance to another card that won't charge interest for 15 months. Highly unlikely she can pay off the debt in 15 months going this route.

Advice welcome on how to manage this debt. Thanks!

Dottie57
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Joined: Thu May 19, 2016 5:43 pm

Re: Child's Debt Consolidation

Postby Dottie57 » Fri Apr 21, 2017 8:19 am

Mettaman wrote:Hi! My daughter works for a non-profit food bank. Her salary is low and she has rung up a $7K credit card debt over 2 years to cover some living expenses. She has an emergency fund that can pay off the debt. She's gotten a roommate which will help lower the apartment rent so she can stop using the credit card for living expenses.

I've told my daughter to pay off the credit card from her emergency fund and stop paying the exorbitant interest. She's been enticed to transfer the balance to another card that won't charge interest for 15 months. Highly unlikely she can pay off the debt in 15 months going this route.

Advice welcome on how to manage this debt. Thanks!


First thing is to emphasize that you only use credit cards for items you can pay for by the time you receive the bill. Spending future income is not smart whether there is interest or not. You still have to pay back the what you spent.

Second, if the food bank does not pay enough , a second job should be taken so current expenses can be paid from current income. Or get a better paying first job.

Third, she needs to know where her money is going and she should make a good effort to reduce expenses.

If the job(s) situation does not change, use emergency funds. Don't bail her out. She won't learn anything.

Good luck.

ryman554
Posts: 605
Joined: Sun Jan 12, 2014 9:44 pm

Re: Child's Debt Consolidation

Postby ryman554 » Fri Apr 21, 2017 8:29 am

Agreed, +1 to the reply above.

Get her to listen to the Dave Ramsey show and/or gift her his book/course or something.

It's got to come from her, otherwise the behaviour will repeat. It's not easy watching a child go down a dangerous path...

Wellfleet
Posts: 349
Joined: Sun Jan 26, 2014 8:18 pm

Re: Child's Debt Consolidation

Postby Wellfleet » Fri Apr 21, 2017 8:46 am

You might consider a carrot if you would like to help financially like matching a ROTH contribution or something like that.

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flamesabers
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Joined: Fri Mar 03, 2017 12:05 pm
Location: Rochester, MN

Re: Child's Debt Consolidation

Postby flamesabers » Fri Apr 21, 2017 10:11 am

I also agree with her using her emergency fund to pay off her credit card debt. She shouldn't be getting anymore credit cards since she is already unable to pay in full every month.

Does she have a budget? That could help her determine where she needs to cut expenses so she can live within her means or decide if she needs to get a second job to pay her bills.

Mettaman
Posts: 9
Joined: Sat Jun 27, 2015 12:31 pm

Re: Child's Debt Consolidation

Postby Mettaman » Mon Apr 24, 2017 10:25 am

Thanks everyone for the advice. Much appreciated. She's paying the credit card debt from emergency fund, starting to budget and cutting expenses.

Dottie57
Posts: 1211
Joined: Thu May 19, 2016 5:43 pm

Re: Child's Debt Consolidation

Postby Dottie57 » Mon Apr 24, 2017 10:29 am

Mettaman wrote:Thanks everyone for the advice. Much appreciated. She's paying the credit card debt from emergency fund, starting to budget and cutting expenses.


Once more thing. Reduction in expenses = building up her emergency fund. This is a must do!

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BL
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Joined: Sun Mar 01, 2009 2:28 pm

Re: Child's Debt Consolidation

Postby BL » Mon Apr 24, 2017 12:08 pm

Be aware that using a credit card that has debt carried on it means she is also paying high interest on her current purchases. Never use a card that is not fully paid off regularly.

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dm200
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Location: Washington DC area

Re: Child's Debt Consolidation

Postby dm200 » Mon Apr 24, 2017 1:36 pm

Mettaman wrote:Hi! My daughter works for a non-profit food bank. Her salary is low and she has rung up a $7K credit card debt over 2 years to cover some living expenses. She has an emergency fund that can pay off the debt. She's gotten a roommate which will help lower the apartment rent so she can stop using the credit card for living expenses.
I've told my daughter to pay off the credit card from her emergency fund and stop paying the exorbitant interest. She's been enticed to transfer the balance to another card that won't charge interest for 15 months. Highly unlikely she can pay off the debt in 15 months going this route.
Advice welcome on how to manage this debt. Thanks!


One action that can work (I have seen it work many times):

1. Do NOT cosign a debt consolidation loan for her!

2. DO: Go to a credit union where you both are (or can be members)

3. DEPOSIT $7,000 in savings or certificate

4. Have her join the credit union, apply for s "share secured" loan with your $7,000 as pledged. Have her arrange for a payroll deduction or automatic loan payment transfer.

5. She is more likely to pay this kind of loan to a credit union than a personal loan from you.

5. Agree to pledge your savings of $7,000. As she pays down the loan, your available savings will be unfrozen.

Qwertykid18
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Joined: Sun Mar 19, 2017 11:58 pm

Re: Child's Debt Consolidation

Postby Qwertykid18 » Mon Apr 24, 2017 2:25 pm

Two words: Dave Ramsey


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