MONEY Kids and Money

4 Ways to Lighten Your Kid’s Debt Load

Converse sneaker ball and chain
The typical 25- to 29-year-old has more than $35,000 in debts. Michael Crichton + Leigh MacMill&

Many young adults are struggling to keep up with student loans, credit-card balances, and car payments. Here's how you can help.

No Mom or Dad wants their adult children to view them as a walking ATM. Still, when they’re struggling financially, what are you going to do?

One thing’s for sure: A lot of them do need help. The typical 25- to 29-year-old owes more than $35,000, according to a recent study from PNC Financial Services—and only about 40% of them say their debts include student loans. No wonder that between credit card balances, car payments, and other bills, 78% of the millennials with debt reported in a new Ameriprise survey that they feel woefully overextended.

If your child is one of them, of course you want to help. These steps will let you do that—without undermining his autonomy or risking your own financial security.

Offer Advice, Not Cash

Resist the impulse to provide a handout, at least initially. After all, you probably need the money for retirement. Plus, you’ll lose a teachable moment. “Bailing your kids out doesn’t help them learn fiscal responsibility,” says financial adviser Deena Katz, an associate professor of personal financial planning at Texas Tech University.

Instead, she suggests, offer to review your child’s expenses and identify ways to free up cash to help with debt payments. Junior isn’t eager to share details about his money with Mom and Dad? Encourage him to use sites such as youneedabudget.com to create a workable plan. Or offer to pay for a year of budgeting help from a professional adviser at a financial planning site such as LearnVest.com ($89 setup, $19.99 a month).

Tackle the Plastic

Twentysomethings often pay lofty credit card rates of 22% or higher owing to their meager credit history and low credit scores (average for millennials: 628). Suggest your child call her issuer and ask for a lower rate, pointing out—if true—her history of on-time payments. “If the provider doesn’t budge, use Bankrate.com or CreditCards.com to shop for a lower-rate card to transfer the balance,” says Beth Kobliner, author of Get a Financial Life: Personal Finance in Your Twenties and Thirties.

Another option, says Gerri Detweiler, director of consumer education for credit.com: Take out a lower-rate loan to pay off the balance. At peer-to-peer lending sites Prosper.com or Lendingclub.com, a millennial might nab a 12.5% rate from investors.

Wrestle Down School Loans

Also help your child explore ways to lower the monthly bill for college debt, such as income-based repayment plans for federal loans. Instead of the standard 10-year payback term, monthly payments under this program are capped at 10% or 15% of the borrower’s discretionary income, depending on when they took out the loans.

The downside is that your kid may rack up more interest over a longer payback period. Any balance remaining will be forgiven after 20 or 25 years of consecutive payments, though taxes will be due on the amount. Have a kid who’s a teacher, works for Uncle Sam, or has another public-service job? He may qualify for loan forgiveness after 10 years with no taxes due. (Get details from the Department of Education here.)

For private student debt, your child may be able to get a lower-rate refi or consolidation loan through another lender or credit union, says Detweiler. Check out student loan comparison shopping sites such as Simpletuition.com and Overturecorp.com for sample offers.

Provide Temporary Refuge

If your child is in too deep for these strategies to work, go bigger. Maybe you suggest your child move home for a bit and direct “rent” toward loan repayment. Or, if you can really afford it, you might pay off her credit card debt—but be clear this is a one-time-only gesture.

Just remember: “Financial help between parents and adult kids is fraught with emotion for both of you,” says Olivia Mellan, a Washington, D.C., therapist who specializes in money issues. Helping your adult children doesn’t give you permission to meddle in their lives, says Mellan, and don’t be surprised if they don’t act grateful. In other words, nothing’s really changed from when they actually were kids.

 

More on Financial Independence

7 Ways to Get Your Kid Out of Your Basement

Is Living with Mom and Dad Starting to Cramp Your Style? Take These Steps to Independence

Taking Five Years to Earn a B.A. is Common—And Costly. Here’s How To Get Out in Four

MONEY Second Career

Software Salesman Revs Up Scooter Sales

Rows of colorful electric scooters line the Carolina Fun Machines show room. As owner Tim Juntgen rolls one of those two-wheelers into the lot for a customer, his smile says it all. This guy loves his job.

“I’ve never met anyone who has walked in that door I couldn’t make friends with,” he says. Once a salesman, always a salesman.

Back in 1973, Juntgen got his first job with IBM, and for the next 34 years he navigated the changing computer market, selling business products for a variety of firms. In 2007 he retired early, bored of software sales, and began contemplating his next move.

The idea for Carolina Fun Machines came to Juntgen in 2008, when his wife, Linda, decided she wanted a scooter to ride to the nearby high school where she teaches. Tim offered to shop for her. It was in his wheelhouse, after all. “I’ve been a motorcycle guy all my life,” he says. “I used to put 7,000 miles a year on my Kawasaki Concours.”

He quickly discovered a gap in the market for Chinese-made scooters priced between $1,000 and $5,000 that came with warranties and were sold by shops offering repairs. “I said, ‘Linda, I know what I want to do, and you’ll get a great price on your scooter,'” he recalls.

Juntgen revved up business by spending $300 a month for Google AdWords, which kicks his website to the top of the search results of anyone within 60 miles of Matthews, N.C., who types in “scooter.” The store’s location, on a high-traffic boulevard, helps too. Plus, he has a ready-made market among motorists sidelined by DWIs. (In North Carolina, you don’t need a license to drive a scooter.)

Last year company revenues hit $650,000; net profits, which Juntgen reinvested, topped $60,000. He took home $90,000. Juntgen no longer has time to ride a motorcycle, unfortunately. But, he says, “I occasionally ride a scooter home from the office — just for fun.”

BY THE NUMBERS

$50,000: Amount needed to start up.

Much of Juntgen’s initial investment — which came from cash savings — went toward buying 20 scooters and a retail computer system. The first year his goal was to sell 100 scooters (marked up 30% to 100% over cost). He sold 130.

2 years: Time before he took a salary.

Tim had made $150,000 a year before retiring, but the frugal Juntgens and their two kids, now 13 and 18, managed to live off of savings and Linda’s $45,000 salary. Now that he’s taking a paycheck, the Juntgens are able to let their savings ride.

2018: Year Juntgen plans to step back from the biz.

That’s when Linda plans to retire, and the couple want to travel: “To make that a reality, I need to build a business that provides me $60,000 to $80,000 of income a year and pays the salary of a general manager,” he says. His growth strategy: moving into ATVs and UTVs that sell for $3,000 to $11,000.

MONEY Second Act

The Write Stuff: 2 Friends Open a Stationery Store

Amy Bass (L) and Evvy Diamond (R) came to owning a stationery store from different paths. Their complementary skills make them a great team. Photo: Ross Mantle

Amy Bass and Evvy Diamond came to owning a stationery store from different paths. Their complimentary skills make them a great team.

In 2007, Pittsburgh stay-at-home mom Evvy Diamond found herself getting itchy. With two of her three sons getting ready for college, she felt it was time for her to earn an income.

Meanwhile, her friend Amy Bass, a VP at a money-management firm, was hitting a midlife crisis: “As I approached 50, I decided I could no longer work for someone else. I needed to own something.”

In time, the two friends’ goals would align.

As Diamond pondered what to do, she recalled her love of notepaper. “Even as a child, I would save the last piece of stationery of every set because I didn’t want to part with it,” she says. Inspired, she bought a letterpress and tried her hand at designing cards.

Buoyed by the response from friends, Diamond rented a booth at the 2007 Stationery Show in New York, which landed her several small orders. Then she thought she got her big break: 5,000 cards for a prestigious New York shop. Only that $12,500 order was canceled before she got paid — and she was left holding the cards. “I knew I could sell them, but it wasn’t going to happen out of my garage.”

Within weeks, she signed a lease for a small retail space nearby, and opened a boutique called Nota Bene to sell made-to-order stationery (her own and others’). Soon Bass began lending a hand after work, and Diamond quickly realized she needed her friend’s business savvy. So they struck a deal: Bass invested $25,000 and signed on as full-time partner. “We’re like two pieces of a puzzle,” Diamond says.

The shop makes most of its revenue — on track to be $500,000 this year — from wedding invitations. But the women found a niche with in-house printing to personalize notecards from vendors like Crane and William Arthur. They’ve also begun stocking items like calendars and pottery, which get people in more regularly. “We found people were coming in for invitations and buying gifts,” Bass says.

Nota Bene has plenty of online competition in these areas, but “people still want the personal connection,” notes Diamond. Same goes for the owners. Bass says the greatest reward is when a satisfied client says, “Oh, my gosh, I need to give you a hug.”

BY THE NUMBERS

Amount needed to start up: $20,000

Diamond’s small initial investment went toward rent, paper, album samples, and fixing up the retail space. She tapped savings from sales generated by her home-based business, along with a line of credit and credit cards.

Pay Bass gave up to work for Nota Bene: Six figures

Bass and Diamond pay themselves $40,000 salaries and reinvest the rest of their profits. Both have working spouses, so aren’t relying on their pay for groceries. That said, Bass says she’s learned to budget more carefully.

Projected annual revenue growth for the next three years: 25%

Nota Bene’s owners plan to expand their bridal business by marketing to wedding planners. Some brides spend $10,000 on invitations, programs, and thank-yous. “But we can also work with women who only have $500 to spend and make it feel special,” says Diamond.

MONEY

Single Mom Opens Women’s Bike Shop

Robin Bylenga’s working life hasn’t always been a smooth ride.

Nine years ago, the then newly divorced mother of three young kids reentered the workforce and began honing a career in sales through a series of positions — the most recent of which involved peddling L’Oréal hair products to beauty salons. While Bylenga liked the paycheck, the travel and long hours required took their toll.

Looking to unwind, she climbed on a bike for the first time in years. Something clicked. “I rode and rode and rode,” Bylenga recalls.

When she was laid off from L’Oréal in 2009 after her division was sold, she decided to take an interim job at a local cycling store.

Within no time, she says, “women began to come in just to talk to me, and to ask questions like what trails were good with kids and what bra I wore when I rode.”

The experience gave her the idea to create a bike-shopping experience for women that, as she says, wasn’t all about how fast you rode or what scars you’d acquired. She imagined a boutique featuring feminine décor, stylish cycling apparel, and positive messages.

In December 2010, after a year of researching the market, Bylenga opened that store, called Pedal Chic, in downtown Greenville, S.C.

To drive traffic to the shop, she has hosted weekly group rides — which are BYOBB, “bring your own beverage and bike” — and offered maintenance classes called Women With Wrenches.

Last year, revenue hit $250,000. Based on sales so far, Bylenga expects to take in $500,000 in 2012 and reap her first profit.

She’s also now paying herself $1,000 a month. While she could take more, she’d rather pump cash into growing Pedal Chic’s e-commerce business.

Her next big goal is to expand, either by franchising or opening boutiques within larger retailers.

For now, though, she’s happy with her return on investment. “Every time I help a customer find women to connect with through cycling,” she says, “it’s a payday.”

HOW SHE DID IT

Profit she made on her trial run: 200%

Before deciding to open a store, Bylenga wanted to make sure she could make a go of it. So she invested $500 in a small inventory of women’s bike apparel to sell at a local bike race. After parlaying that into $1,500 in sales, she was convinced.

Amount she needed to start Pedal Chic: $50,000
The majority came from a five-year, 3.5% startup loan from Michelin Development. She also personally invested about $10,000. Together, the money allowed her to sign a lease, buy inventory, and hire five employees.

When Bylenga expects to match her previous pay of $60,000: 2014

In tandem with the child support she receives from her ex, her salary — albeit small — allows her to scrape by while reinvesting in the business. Because she’s been in belt-tightening mode, she hasn’t yet added to her savings but notes, “Pedal Chic is my retirement fund.”

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