When I was growing up, money was something that my parents just didn't discuss with my siblings and me. I think it was considered a private, "adults only" topic, not appropriate to share with children. Don't get me wrong, I heard plenty of "that's too expensive" when I wanted some kind of overpriced trendy fashion item. (And we're talking about the 70s, so I'm sure it was always something utterly hideous like wide-legged corduroys or plaid polyester tunics...come to think of it, Mom was probably doing me a favor...) Or the equally popular "we're not spending our hard-earned dollars on that" when I set my sights on a silly fad toy. (Pet rocks, anyone?) But concrete lessons about saving, spending, or making wise financial choices? Not so much. We didn't really get into the nitty-gritty of how much things cost, or ways to comparison shop, either. And we certainly never touched on the taboo topics of handling credit, or managing a loan.
And I totally get it: different generation, values, economic landscape, blah blah blah. But Husband and I have opted to take more of an open-book approach with our kids, to try to equip them as best we can for the day when they will have to steer their own financial ship. So we started giving them an allowance when they each reached Kindergarten age--80% to their own wallets, and the other 20% automatically taken off the top (by the Bank of Mom) to be equally split between a Savings Account and a Donation Fund. Any electronics or video games they crave must come from their funds. When they have enough accumulated wealth, I help them scour Amazon for the most competitive prices. If they tire of a game, we trade it in for credit that they can apply toward their next selection. And this has all gone remarkably smoothly...especially since it means I never have to keep cash on hand to pay them, as everything is online-ordered anyway! (Hey, they're learning about credit already, and even "virtual banking", right? I'm merely preparing them for the not-so-distant future when the government determines it's too much of a waste to continue printing bills and minting coins, and e-commerce replaces the "currency of the realm"...)
Over the years, we've found that Derek tends to be a patient, save-up-for-something guy. He reads reviews of games he's interested in (I taught him that!) and talks to his friends before he commits any of his precious resources. Riley...well, he's my impulsive spender. As much as I try to counsel him on the "less-is-more" philosophy, he's just a boy who likes...stuff. Let's just say money does not grow warm in his pocket before he's looking for a way to unload it on whatever's caught his fancy this week. For example, when informed that it was time for him to receive his November allowance, he lit up with that "spendthrift" glow he gets, and asked to peruse Amazon...for a stuffed Toad character. (From the Mario video games...I should mention that he has FOUR of these creatures already, each a different color...the boy has a diehard collector--or packrat--mentality, what can I say?) Now, as he'd already ordered a Nerf battle ax, (don't ask me, the brother-warriors evidently need more ammunition to beat each other to a pulp in their imaginative combat games. I'm a girl, I don't pretend to understand...) he didn't have enough remaining in his coffers for the Toad. In stepped Derek, who offered to "lend him the $5" so he could complete his purchase.
Wow. Unexpected formal business transactions happening right in front of me! I was not anticipating banking this morning in our pajamas, but I hastily intervened anyway, to clarify the terms of our proposed bargain: "You realize that means next month $5 will be subtracted from your allowance, and added to Derek's, to settle the debt?" Riley nodded vigorously in agreement. "And neither of you will have any money left for the rest of this month?" Both indicated that they understood. "And you're sure you want to do this?" 'Yes' from each one. Riley was practically dancing on the spot in his excitement as he exclaimed, "I'll be nice to you and play whatever you want for the whole month!" Derek and I both reacted with extreme skepticism to this outrageous promise. "Okay, then I'll call you Sir Derek for the rest of the day!" This cracked Derek up, and he readily accepted the honor (and of course the extra payback in December).
So there you have it. The boys' first official loan, complete with terms of repayment, sealed with a handshake (even that was their idea). Sniffle. I'm so proud! If this transpires successfully, next time maybe I'll introduce the concept of "interest" and see where that leads...