As any mother of a boy between the ages of say 4 and 12 will tell you--keeping them set up with a nice pair of jeans is about next to impossible. It always seems that shortly after buying a new pair they end up looking like this. This particular pair was bought for Christmas. So, with that said, my 7 year old is going to have about 20 pairs of shorts this summer because after they have holes in the knees I cut them off and turn them into shorts. I can't stand the thought of just throwing them out. However, I don't like the cut-off look either. A bit too "white trash" for me. Sorry!
So here is what I do to them to make them look nice. I usually cut them off right where the hole is so that gives me enough to double fold the hem. We like our shorts a bit longer--just above the knee. You can buy just about any color of topstitch thread nowadays and some that are even specifically for jeans. It will say on the spool--extra strong for jeans--or something along those lines. It really does make a big difference on the look of your hem. It makes it appear that they were done this way originally and not fixed by mother. If you have children who are "particular" about what they wear and don't want handmade things--this should ease their burden.
A couple of tricks when hemming denim jeans. Invest in denim needles. The seam allowance is SO thick that you are bound to break your Universal needles otherwise. Also, a couple of years ago I found this handy little gadget called a Jean-a-Ma-Jig. It is AWESOME and helps to sew over the two thick seam allowances. You can find it in the notions section of your fabric store. And it only costs about $3.