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Financial Feud

Financial Feud: Buy iPhone outright vs. Make monthly payments

Paddy Hirsch Jun 29, 2013
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Evelyn, I think your decision to have your son shoulder the entire cost of the phone, including the contract, is an excellent one: we need to understand the real cost of these items, and that’s often obscured by complex financing and contract plans. So this is a good opening lesson for your son. But making him pay the whole amount up front seems a little harsh. For one thing, you say he has a history of being a spendthrift, but he has somehow managed to save up $825 and has it readily available? That seems a little contradictory. And then, by making him pay up early, you’re missing the opportunity to teach him a valuable lesson about the way this kind of business works, as well as about managing money generally.

Why not agree to let him pay month-to-month, on the understanding that if he defaults on the agreement by failing to make a payment, he loses the phone? You could write a clause that allows him to get it back my making you whole and paying a penalty. If he refused to give it up, you could just cut the service off. That would teach him to respect contracts and read small print!

So, in my judgment, bearing in mind the opportunity for teaching your son some good personal finance lessons, I’d say you are NOT right!

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