Since my 15 year old does not have a credit card and will not have a credit card, nor does she or will she have a debit card, she will be taking travellers checks when she travels abroad this summer.
And she will be hit with transaction fees, handling fees and will find many places that just don't accept them anymore. Good luck to her, for sure.
$20,000 is left in your brokerage account rather than using it to buy a car outright. You gain a modest 5% over the 5 years you have a loan. Your gains are $5,525. That money grows you $18,709 over the next 25 years.
10 years later, you buy another car for $20,000 at 0% interest. You leave $20,000 in your brokerage account. You gain a modest 5% over the 5 years that you have the loan. Your gains are $5,525. That money grows you $11,486 over the next 15 years (not 25 because it's 10 years later).
10 years later, you buy another car for $20,000 at 0% interest. You leave $20,000 in your brokerage account. You gain a modest 5% over the 5 years that you have the loan. Your gains are $5,525. (You're at the end of the 5 years, so no more growth.)
In my original calculations, I didn't include this last $5,525, but lets do that and see what we have at the end:
5535
18709
5525
11486
5525
46,860
That's what you make over 25 years if you use 0% interest. For 3 cars over the course of that 25 years, you would have to have saved $46,000 in rebates to beat using 0%. That averages to over $15,000 per car in rebates. Saving $2,000 per car doesn't even COMPARE to these returns. Even if your return rate is 3%, your gains are $21,185. Still WAY above the $6,000 you'd save with rebates.
That is how I calculated those numbers.
$20,000 is left in your brokerage account rather than using it to buy a car outright. You gain a modest 5% over the 5 years you have a loan. Your gains are $5,525. That money grows you $18,709 over the next 25 years.
10 years later, you buy another car for $20,000 at 0% interest. You leave $20,000 in your brokerage account. You gain a modest 5% over the 5 years that you have the loan. Your gains are $5,525. That money grows you $11,486 over the next 15 years (not 25 because it's 10 years later).
10 years later, you buy another car for $20,000 at 0% interest. You leave $20,000 in your brokerage account. You gain a modest 5% over the 5 years that you have the loan. Your gains are $5,525. (You're at the end of the 5 years, so no more growth.)
In my original calculations, I didn't include this last $5,525, but lets do that and see what we have at the end:
5535
18709
5525
11486
5525
46,860
That's what you make over 25 years if you use 0% interest. For 3 cars over the course of that 25 years, you would have to have saved $46,000 in rebates to beat using 0%. That averages to over $15,000 per car in rebates. Saving $2,000 per car doesn't even COMPARE to these returns. Even if your return rate is 3%, your gains are $21,185. Still WAY above the $6,000 you'd save with rebates.
That is how I calculated those numbers.
It's a wash because I didn't calculate the returns that the $20,000 would be earning you either. If you're replacing the 20K with the amounts you would pay toward a car, it still gives you smaller gains than the lump sum of 20K from the beginning of each 10-year cycle, but I'm assuming that they would be relatively close... just noise. I'm just calculating the compound interest on the gains made during the loan period.
It's a wash because I didn't calculate the returns that the $20,000 would be earning you either. If you're replacing the 20K with the amounts you would pay toward a car, it still gives you smaller gains than the lump sum of 20K from the beginning of each 10-year cycle, but I'm assuming that they would be relatively close... just noise. I'm just calculating the compound interest on the gains made during the loan period.
You have saved over time $20,000 in your account that earns 5% annually. You have the choice to purchase a car for cash or to finance at 0% for 5 years. You can either pay $333.33 a month in a car payment, or put that back into your account to rebuild your savings over that time.
Option 1. You pay Cash.
Now you have $0 in your account.
Each month you deposit $333.33
After 60 months, you will have $22,668.47
Option 2. You Finance
You have $20,000 in your account.
Each month you deposit $0, and pay that to your finance company instead.
After 60 months, you will have $25,560.67
Paying cash costs you $2,892.20
If you keep saving for 5 more years while you drive this car:
Option 1 - You have $51,760.24
Option 2 - You have $55,471.98
Paying cash now has cost you $3,711.73
Time to buy another car with the same options as before.
Option 1. You pay Cash.
Now you have $31,760.24 in your account.
Each month you deposit $333.33
After 60 months, you will have $62,833.12
Option 2. You Finance
You have $55,471.98 in your account.
Each month you deposit $0, and pay that to your finance company instead.
After 60 months, you will have $71,190.44
Paying cash for these 2 cars has now cost you $8,357.33
If you keep saving for 5 more years while you drive this car:
Option 1 - You have $103,305.90
Option 2 - You have $114,031.34
Paying cash now has cost you $10,725.45
So just based on paying cash for these 2 cars, you have cost yourself the equivalent of a European vacation for the whole family.
And so on.
See, you're kind of proving my point. Up until my first post (I haven't read the recent pages, so can't comment on those) I did not see a single person who was offended by your lifestyle. People questioned it, because I assume they felt the extreme might be unrealistic. That does not equal offended.
Back to my first post, I said "reacting to an attitude," meaning the tone of some posts here, but you wanted to read "offended by your lifestyle." What makes you assume that? What makes you so special that anyone would care what you do? I sure don't care.
I am not offended by a no-credit lifestyle. In order for me to be offended, some part of me would have to agree with it, while not living up to it. I don't agree with it for my life and I am very secure in that point of view for my life, so, no, I am not offended by your lifestyle. Sorry to disappoint you.
I've never had anyone be so offended by my personal financial situation as I have on this thread lol
What is so "holier than thou" about sharing my experience? It's been suggested I can't so much as buy a loaf of bread without credit, and that simply hasn't been our family's experience at all. I suppose by Velochic's definition, we've used credit in the loosest sense (as in, renting an apartment without paying the entire lease upfront in cash) but I was under the impression that we were all discussing financing things, having credit cards, lines of credit, carrying debt or even being debt free but having "good credit" etc.
My husband (according to the mortgage lender and car dealership) has no credit score. No number. I don't know if that was their way of saying no debt, but no number could be calculated. It's as if "he didn't exist". I don't know much about Dave Ramsey or what he considers a 0 credit score, though. We still qualified for the mortgage and car (though chose not to buy at that time). We've never had a problem with utilities, or renting an apartment, or getting airline tickets, rental cars, any of that. What is so offensive or holier than thou about that? It's just our experience.
I've said several times live and let live, if credit works for YOU, then go for it. We just choose not to even get involved. I think when people begin feeling "offended" when no offense has been intended or even suggested (I don't believe I've made any judgment toward people who use credit wisely), maybe the examination should be inward rather than outward. How am I hurting YOU by not using credit (in the sense I assumed we were all talking about)?
I compared it to minimalism because sometimes at other people's houses, THEY will say to ME, without me saying a word or even thinking anything "you must think my house is a mess..." or "you must think my house is cluttered because you're so decluttered..." or some variation, when I wasn't thinking anything negative. Just by virtue of me being decluttered made me suddenly accused of being "judgmental" or "holier-than-thou" when honestly I don't care what your house looks like. I really, really don't. It's not my space or my life. Same with finances. I don't care who has credit, especially if it's wisely used, but simply by virtue of me choosing a different way, I'm suddenly "holier-than-thou". That's in your head. Sorry.
For the calculations... First of all, it's assuming the $20,000 up-front, not at the end of the 5 - year cycle. So that 20K is giving you returns from the beginning (which is how I was calculating). Now the other question is... if you have the $333.33 to put back every month instead of making the payments on the 0% interest... why are you tying up 20K in a car? It doesn't cost you anything to keep that 20K for "just in case", as the loan itself is not costing you anything. A rebate can't beat what that 20K is going to continue to earn for you, even if you put it back (as reiandmoi showed). The question, though is if a person really would invest exactly the amount of a car payment every.single.month.without.fail. Probably not. Even as disciplined as we are (we save to buy our cars and put back $400/month), we have times that things come up and we skip putting money in our car fund. So, you can't really say that at the end of 5 years you're going to have the full 20K again. It's really, all around, kind of a foolhardy way to approach car buying when you get into the numbers. If you can afford to put back 20K over 5 years, then you are in a financial position to leverage that 0% financing. There are many ways to calculate the spread between paying cash and using 0%, but it's based on your personal finances. Some people will take out that 20K and never put a dime back in. That's the worse case scenario and most people are somewhere in the middle. Again, it goes back to the mindset of using a corporation's money to make money for yourself.
Exactly. My niece learned this the hard way last year. Her parents stayed in England while she and friend traveled across France, Switzerland and Italy. The places that did take traveler checks charged a 15-20% service fee however most places she went the younger sales associates didn't even know what they were! If there wasn't an older associate/manager they had no idea how to process them. This was prevalent in the open markets and grocery stores. None of the smaller hotels would take them. But the ATM's were tricky too since the networks often went down. Between the 2 of them they were able to get by (friend had a debit card with a credit option). I would not send my child to Europe nor would I go myself with a combo of both. Travelers checks and debit/credit card.
And she will be hit with transaction fees, handling fees and will find many places that just don't accept them anymore. Good luck to her, for sure.
Anyone who doesn't have anything particularly useful or topic appropriate to contribute to a thread but simply comes into comment on the alleged "attitude" of a poster they don't agree with seems to be way more invested in personal attacks to someone's character than the actual topic.
(bolding mine) You cared enough to respond...specifically, to me...not once, but twice, without adding anything topic-appropriate to the discussion. It seems you care a lot... 
So, thank you for proving my point 
See, you're kind of proving my point. Up until my first post (I haven't read the recent pages, so can't comment on those) I did not see a single person who was offended by your lifestyle. People questioned it, because I assume they felt the extreme might be unrealistic. That does not equal offended.
Back to my first post, I said "reacting to an attitude," meaning the tone of some posts here, but you wanted to read "offended by your lifestyle." What makes you assume that? What makes you so special that anyone would care what you do? I sure don't care.
I am not offended by a no-credit lifestyle. In order for me to be offended, some part of me would have to agree with it, while not living up to it. I don't agree with it for my life and I am very secure in that point of view for my life, so, no, I am not offended by your lifestyle. Sorry to disappoint you.
Since my 15 year old does not have a credit card and will not have a credit card, nor does she or will she have a debit card, she will be taking travellers checks when she travels abroad this summer.
I hope, from a safety perspective, that you help your dd get a credit card prior to her travels. I would not want my young daughter abroad with only traveler's checks. In an emergency, she really needs to be able to quickly have a way to pay for medical, travel, food, a safe place to stay. Even a card w/a $1000/limit would provide a safety net. I would not send my child abroad with only traveler's checks. My DH has traveled all over Europe, and knows first hand that there were times/places Traveler's Checks didn't work out. He and his buddies would rough it, sleep on a beach, charm their way into a meal (student living obviously). It's probably considered very sexist, but we would never want our dd to be in that situation. The world is a different place today, and the unexpected happens.
Anyway-sorry. OT.
Besides that, you have to turn travelers checks into money and then you're carrying your money around with you. I traveled when I was younger and did not have a credit card, and basically you could either pay a butt load of exchange fees or have all your money in cash either stashed in your room somewhere (bad idea) or hiding on you (bad idea). I chose to pay the exchange fees multiple times to keep my money as tc stashed in my room with the check numbers written down in 3 places, plus a photo copy of all the checks in my backpack, and as I cashed them I crossed them out.
Even having a bank account with an international bank, or a bank with minimum transaction fees for international withdrawals is better than traveling with travelers checks. You just go to the ATM like normal and withdraw small amounts of money like normal, and the rest of your money is safe.
My daughter is not travelling alone. She is with a guided tour group composed of three of her teachers, the tour guides and about 20 other students. If an emergency happens, there are adults there to handle it. I absolutely will not be getting a 15 year old a credit card just to travel to Europe for 12 days with a school group.
The reality is that when you travel overseas, any method of cash flow is going to involve some fees. Currency exchange fees, check cashing fees, ATM fees, taxes etc etc. And all carry risks. If someone steals your stuff, it doesn't matter what you have on you, it's a pain in the rear. While there's no way to get straight cash back, carrying a credit card, particularly in another country, doesn't automatically guarentee access to funds if it's stolen either. If your card is gone, how are you going to take it to the ATM?
Which is why I suggested, as do most travel sites, that you have both- travelers cheque (or the like) and a debit/credit card. Yes there are fees with both but TC fees tend to be much higher. And as I noted with my niece was that the ATM networks were often down so what worked is that they had a combination of both. That is what protected them.
Now I also assumed, as many others did, was that your daughter was traveling on her on/with friends not on a supervised school sponsored trip. But I can pretty much guarantee you that those adults will have some kind of credit/debit option just for those kinds of emergencies.
My daughter is not traveling alone. She is with a guided tour group composed of three of her teachers, the tour guides and about 20 other students. If an emergency happens, there are adults there to handle it. I absolutely will not be getting a 15 year old a credit card just to travel to Europe for 12 days with a school group.
The reality is that when you travel overseas, any method of cash flow is going to involve some fees. Currency exchange fees, check cashing fees, ATM fees, taxes etc etc. And all carry risks. If someone steals your stuff, it doesn't matter what you have on you, it's a pain in the rear. While there's no way to get straight cash back, carrying a credit card, particularly in another country, doesn't automatically guarentee access to funds if it's stolen either. If your card is gone, how are you going to take it to the ATM?
Which is why I suggested, as do most travel sites, that you have both- travelers cheque (or the like) and a debit/credit card. Yes there are fees with both but TC fees tend to be much higher. And as I noted with my niece was that the ATM networks were often down so what worked is that they had a combination of both. That is what protected them.
Now I also assumed, as many others did, was that your daughter was traveling on her on/with friends not on a supervised school sponsored trip. But I can pretty much guarantee you that those adults will have some kind of credit/debit option just for those kinds of emergencies.
I do agree that having variety is good protection, just like diversifing an investment portfolio is the best protection for it. However, I am still not going to get a 15 year old a credit card for a 12 day trip. Not going to happen. She *might* maybe potentially get a checking account with a debit card-she's already got a job and it's getting to be time that she learn how to use a checking account and debit card. And if we do set that up before her trip, she will likely take the debit card and the travellers checks both. But at the moment, since she doesn't have that account, the tc are the route.
As far as the teachers/tour guides using credit in case of an emergency...that's their choice, I don't care. It's not like I have some moral opposition to everyone on the planet using credit cards. How someone else chooses to handle an emergency is their own choice.
I do agree that having variety is good protection, just like diversifing an investment portfolio is the best protection for it. However, I am still not going to get a 15 year old a credit card for a 12 day trip. Not going to happen. She *might* maybe potentially get a checking account with a debit card-she's already got a job and it's getting to be time that she learn how to use a checking account and debit card. And if we do set that up before her trip, she will likely take the debit card and the travellers checks both. But at the moment, since she doesn't have that account, the tc are the route.
As far as the teachers/tour guides using credit in case of an emergency...that's their choice, I don't care. It's not like I have some moral opposition to everyone on the planet using credit cards. How someone else chooses to handle an emergency is their own choice.
Then get her a pre-paid visa card. We travel to Europe once or twice a year and have lived there multiple times over the years. I guarantee you that your dd is going to have more headaches with traveler's checks than the supervisors are willing to deal with. They may cover her needs, but I doubt they're going to give her spending money. Traveler's checks are EXTREMELY inconvenient and expensive to use. It just doesn't make sense that you would pay 15% or more over the cost (which is already very high in Europe with the exchange rate) just to prove a point (that you can live without credit... yes, you can, but it's obviously not always the smartest thing to do). You don't pay extra fees usually when using your credit card abroad. We don't, anyway. We just pay that day's exchange rate. No fees involved. And getting cash with our debit card is super inexpensive, too. We don't pay fees for that, either. We have up to 15 foreign withdrawals a month free of charge on our account.
No offense here, but YOU aren't the one that is going to be dealing with the problems of just sending traveler's checks... your dd and her teachers are. It seems kind of selfish to knowingly put them in that position just on principle. Credit is not so evil as to jeopardize your dd's safety and comfort to avoid it.
My dd goes abroad with her school for the first time in 5th grade. She will absolutely have one of our credit cards when she goes. We already load a pre-paid visa for her to spend "her" money from her savings when we go on trips abroad. It's a lot safer than cash, but it's like using cash. When it's gone, it's gone. However, we are teaching her good money management skills and can trust her to use her head with making purchases even now at 9 yo. By 15, I expect she'll be handling her own money without us micromanaging it.
Yikes no need to get defensive! 
I was not implying that she should have one since I clearly stated that I *assumed* she was traveling alone when I made my initial recommendation. Since she is on a school supervised/sponsored trip I was making the point that if an emergency came up with any of the students (and it was needed) the school would most likely handle it via credit.
I do have to say that *I* would care that the school and the chaperone's were prepared for any/all emergencies. I would want to know how the chaperone's would handle emergency medical needs for my child, missed flights, lost luggage. I would not be comfortable sending my child oversea without an action plan in place.
Maybe its me though because I have lived overseas and spent a lot of time traveling thru Europe both as a teen and now as grown woman in my late 40's. I have been stuck on train when the train workers went on strike, missed my flight for the same reason. I have shown up at hotels that were closed or overbooked. I like to be prepared. But that has nothing do with Europe, credit cards, ATM's or travelers cheques, LOL. If I was sending my 15 year old off with only some travelers cheques in her pocket I would care how the chaperone's would handle an emergency.
And I do have say that by time my child is 15 he will be well versed in money management. Already at age nine his has a saving account. He has been getting an allowance since he was 5. He saves a third, donates an third and can spend a third. He tracks his interest, projects out how log it will cost to save for a big lego set, etc. I think it really important that he understand finances long before he gets a paid job.
I do agree that having variety is good protection, just like diversifing an investment portfolio is the best protection for it. However, I am still not going to get a 15 year old a credit card for a 12 day trip. Not going to happen. She *might* maybe potentially get a checking account with a debit card-she's already got a job and it's getting to be time that she learn how to use a checking account and debit card. And if we do set that up before her trip, she will likely take the debit card and the travelers checks both. But at the moment, since she doesn't have that account, the tc are the route.
As far as the teachers/tour guides using credit in case of an emergency...that's their choice, I don't care. It's not like I have some moral opposition to everyone on the planet using credit cards. How someone else chooses to handle an emergency is their own choice.
I think this is a valid point in theory. However one of the benefits being missed here is that if you buy a car outright with cash and then you or your spouse loses your job it is one less monthly payment that has to come out of your emergency fund and one less thing to worry about.
n/m.
Our family is trying to live without debt. It is difficult but we decided on this path after my husbands job was reduced to part time (he is a structural engineer) and I was on maternity leave. If we didn't have as many monthly payments (car payments, student loans, credit cards, mortgage) it would have been much easier. I think that the argument of needing credit in case of emergency makes sense in theory, but in reality the credit really held us back and stressed us out when our emergency came. I also think every family has to pick what is right for their particular situation. For us, it will be purchasing large items with cash up front and living without debt. I have also spoken to our insurance and mortgage company and although they do look at credit scores, they also allow us to work with an actual person. So if our credit score suffers because we use too much cash for everything, the person we work with will be able to make the appropriate adjustments for approval. Also, they always consider the fact that you are putting a large amount of money down and whether you have savings and other emergency funds.
I think this is a valid point in theory. However one of the benefits being missed here is that if you buy a car outright with cash and then you or your spouse loses your job it is one less monthly payment that has to come out of your emergency fund and one less thing to worry about.
If you take the money out up front, you have less in reserves to begin with. It's easier to take a little bit of money at a time from the EF with the anticipation that you may find a job before it runs out. However if you don't have the money to begin with... I guess you can always sleep in the car that you own outright. (And to be clear... I am not advocating financing a car. I'm advocating utilizing 0% financing when it's going to help you increase your net worth. We personally save for a car and outright buy certified used cars that are just a couple of years old.)
This thread is about living without using credit... not living debt-free. Big difference.
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