MONEY TALK: If kids ask for a loan it's time to question yourself

I am not totally against lending money to your children. However, before  doing so it is essential you ask yourself three questions.
1) How have they got into a financial position so that 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  from you (no matter how small the sum) because of  mismanagement of money you could be doing him or her a disservice if you  agree to do so.
Responsibility is the  thing some people dread most  but it also can be the  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 recognise 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  and what lesson could he learn  (positive or negative) if we lent him money? He had just finished studying and was looking for a job.
I had noticed some of his friends had borrowed money from their parents and were paying it back in small amounts, such as $20 per week, when they were living at home, working, and not paying board. I noticed they  spent their money on alcohol and takeaways and paying back debt was not a priority.
We decided to let our son have the money, but we attached conditions. When he got a job, he would have to pay us back at half his wages, and still pay board.
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  explained to him how much the interest would have been had he taken out 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  quickly he was debt free. He then started saving the same amount he had been paying us and so was able to buy another, more reliable car without a loan.
He learned  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 provide the loan,  make the conditions tough enough so that they learn money owed should be repaid as a priority or, if possible, to avoid debt.
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 speaker and trainer who is available to speak with businesses and community groups on how to become financially savvy in eight easy steps.