Would you charge your kid 4% interest on money he/she borrowed from you? My dad did.
My parents parented intentionally. Their goal was to mold my sister and me into well-adjusted, capable, responsible adults. Rarely was a decision made without some wisdom behind it. I’m not saying they were perfect or didn’t make rash decisions, but, their approach to parenting allowed for those imperfections without losing perspective of their goal.
My father set his mind to ensure that we were wise in managing our money. He also wanted us to be good employees. When he agreed to buy something for us, say a video game, we would have to buy it and then give him the receipt. No receipt? He wouldn’t pay us back. His rationale? That’s how it works in the real world. Travel on business but don’t turn in the receipts? Kiss that plane ticket money goodbye.
When I graduated from college, I got a job in Plano, Texas. I had zero money for any deposits for the apartment, water, electricity and so forth. I asked my dad if I could borrow the money and he said yes, with a 4% interest. We drew up a contract together and set the payment schedule and amount due each month. While some people would argue that he was taking advantage of me, I never felt more loved. He was teaching me about life because he wanted me to be as successful as I possibly could.
I’ve never spent more than I have earned. I’ve never taken a loan I couldn’t repay. I have learned how to manage my money wisely. And, all of this is because my dad was loving enough to expect receipts, charge me interest and treat me as the adult I was becoming.
And now, as a parent myself, my job is to raise my kids with the same goal in mind and yes, I will charge them interest.