I recently had an eye-opening conversation with my son. Sometimes as parents we don’t realize that the simplest of concepts to us are often the most confusing to our kids.
Take the idea of borrowing money.
When I tried to explain to him what it means to borrow money, he just looked at me with a puzzled face and kept saying, “I don’t get it.”
“What don’t you get?” I asked him.
His responses were really interesting.
For example, he said, “If you borrow a dollar from someone, you can’t give it back, because if you spend it, it will be gone.” He couldn’t grasp the concept that it wouldn’t be the exact same dollar bill one would be returning to the lender.
He also replied with, “Why would you have to borrow money from another person? You can just go to that machine in the bank and get dollars from there.”
That response led to a completely separate conversation about the fact that an ATM is not a money machine
providing a never ending supply.
Borrowing money or getting a loan is something which our children will most definitely do as they get
older.
Credit cards, mortgages, and interest rates all fall under the borrowing money umbrella and I will touch
on all within my lessons.
But, breaking down the idea of borrowing itself is absolutely essential.
The Federal Reserve Bank of New York releases a quarterly report called the Household Debt and Credit
Report.
The report looks at trends in borrowing and indebtedness including mortgages, student loans, credit
cards and auto loans.
Broken down it provides insight into how much debt Americans are carrying, what they are borrowing for and gives some insight into how confident they are in their ability to pay the loans back.
Our kids borrow things all the time. Library books, clothes, toys, even school supplies.
All of these are items kids either expect to get back from friends in good shape and in a timely manner or are things kids are being taught to respect and return to someone else.
Borrowing money is of course on an entirely different level. However, the same concept is there. Borrow money from someone and give it back in full and on time; that someone will be happy and will most likely lend money to you again.
But, fail to give the money back and that someone won’t want to lend you money again and you will be expected to pay that someone even more money because they will be disappointed with you.
Basically, think of it as being punished by having to pay interest.
If you don’t return a library book on time, it will cost you!
Fail to pay back money you borrow on time, it will also cost you!
Overall best lesson for our kids – if you borrow money, give it back as soon as you can to avoid trouble.
Want to take this lesson further? Give us your email and receive a free download to a story that you can read with your child called “The Lunch Lesson,” educate yourself even more on how to explain borrowing money to kids and share a fun activity called “Word Scramble.”
