How To Ensure Your Children Are Financially Literate: Part 4

Having looked at the 3 principles

1 Accounting for you allowances
2 To get money you need to work for it
3. The principle of saving


Let us look at the fourth principle

4.     4.   The Loan principle

Sometimes a loan makes sense. Sometimes we need to teach our children valuable lessons - so instead of paying for an item, you give them a loan to buy the item.

For example if an item is on a low offer and it will only make sense to buy it now.

When They Find Huge Savings Off Things They Want 

Once the loan is disbursed then the payments can take two formats

*Give the full allowance in full and get paid a predetermined amount back. The child can chose to pay more than the predetermined amount but never less

 Or

*Give the allowance having deducted the monthly repayment

Some Offers Make Sense

Allow the discussion to be mutual. It will enhance understanding.

At the very least repaying the loan should show them the link between their lifestyle and expenditure. They will in future understand not to borrow money unnecessarily.

As the loan is being repaid any monthly obligations should not be stopped monthly eg saving should not stop.

The loan principle should be applied just as the banks do so as to enhance understanding. 

Damaris Musinguzi is the Author of 10 things your children should learn about money. She also runs an online business  Utensils r us which is one of the first in Kenya.









How to ensure your children are financially literate Part 1

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