What can my family learn if I lend them money

na 87.30 What can my family learn if I lend them money.doc
 
I am not totally against lending money to your children. However, before lending money it is essential you ask yourself three questions. 
 
1) “How have they got into the financial position so they want to borrow money from me”?  2) “Is it for a ‘need’ or a ‘want’?
3) What could I be teaching them if I say yes or no?   
 
If your child wants to borrow money from you (no matter how small it is) because of their own mismanagement of money you could be doing them a disservice if you lend them money.  Responsibility is the one thing some people dread most of all but it can be the one thing which will develop your child’s character more than anything else.  Your children will always be your children, but not always be children so it is important to recognize the difference.
 
When our Son wanted to borrow money from us a few years ago for car repairs we asked ourselves -  why does he need to borrow money and what lesson could he learn (either positive or negative) if we lent him money.  He had just finished studying and was looking for a job.
 
I had noticed that some of his friends had borrowed money from their parents and were paying it back at small amounts such as $20.00 per week when they were living at home, working and not paying board.  I noticed they were spending their money on alcohol and takeaways and paying back debt was not a priority. 
 
We decided to loan our Son the money with the following conditions.  When he got a job, he would pay it back at half his wages, and still pay board as well.  Paying us back would be a priority.  We drew up a contract with conditions and my husband, myself and our Son signed it.   We also sat down and explained to him how much the interest would have been had he got a commercial loan.  We didn’t charge him interest.
 
As soon as he got a job he paid us back the agreed amount plus more, so very quickly he was debt free.  He then started saving the amount he was paying us back and so was able to buy another more reliable car without a loan.
 
He learned from this that it is good to help people (as we helped him).  He also learned about contracts, the bondage when you are in debt and the cost had he taken out a loan with interest.  He also learned that by saving he could buy a car without any debt which saved him future interest costs.
 
So, if your children come to you looking for a loan.  I suggest you ask yourself the three  questions and then if you do decide to loan the money, you make the conditions tough enough so they learn that debt should be repaid as a priority or if possible avoided all together.
 
Sylvia’s book, Parents: How To Stop Your Kids From Going Broke is available from www.silbo.co.nz,  Paper Plus Stores, and Christian Bookshops.  Sylvia is also a