My 11 Year Old: The Loan Shark?



Over dinner the other night, I asked the boys what the school policy was about going to the bathroom. I had read a media story about some teachers giving out passes and students having to hand one over each time they needed to go to the bathroom. I had never come across this kind of approach before.

It turned out that our school uses the same system. When explaining how it worked, Tom started smiling. “Noah ran out of passes the other day so he asked if he could borrow one. I told him “yes” but only if he paid interest of one pass for each day that he didn’t pay me back.”

I was intrigued. “What happened then?” I asked. “Did he pay it back the next day?”

By this time, Tom was smiling broadly. “No. It took him twenty days so he had to pay me twenty passes!”

Noah is one of Tom’s close friends so I wanted to see how this impacted the friendship. “How did Noah feel about that?” I asked. “He wasn’t happy,” said Tom, “but he had agreed to it so he knew he had to pay.”

Zee and I were pretty impressed. We liked the entrepreneurial spirit that we were seeing in Tom. It reminded us of the stories you often read about entrepreneurs like Tony Hsieh at Zappos who came up with money-making mini businesses while they were still at school. The fact that Tom even knew about the concept of interest is due to our approach with allowances. Zee and I pay the kids interest on the money they save. The less they spend of their allowance, the more money they earn in interest. They like to keep an eye on how large those interest payments can get.

We talked some more with the boys about whether it’s a good idea to “buy” something where you have to pay interest. The easiest example we could give them was credit cards as they see us using them. We explained that when we bought something with a credit card, it was essentially a loan.  This was a surprise to Michael, our eight year old. “Wait, you still have to pay the money?”

Once we got him through that little shock (ha!), we talked about how, if we didn’t pay our credit card bill each month, we would have to pay interest on the amount and that it would quickly start to add up. We said that we use credit cards for the convenience but that we only spent what we could pay for at the end of the month. And then we reminded them that, if we can’t afford it, we don’t buy it. We save for it until we have enough money. Right now, we are starting to save for the new car that we will likely need in a couple of years.

You could see it sinking it a bit. The trick with our guys is to keep it short or we lose their attention. We quickly moved on to what kind of car they wanted us to buy.

Over the next few days, I shared the story with a few friends. Most had the same reaction as Zee and me, but one mom reacted negatively. “What happened to just helping your friend out?” she asked. “Wouldn’t it have been nicer for Tom to have just given the pass to Noah?”

That stopped me in my tracks. Were we somehow bringing up a loan shark? Taking advantage of people in need is completely against the values that we’re trying to give our children.

I checked back in with Tom. “How easy is it to earn these passes?  Are they hard to come by?” I asked. “Oh no,” said Tom. “Our teacher gives them out all the time. It’s really easy to get them.”

So, I’m reassured that Noah was in a position to “earn” passes pretty quickly to pay Tom back. But, what do you think? Should we be happy that Tom saw an opportunity to create greater value for himself? Or is this a worrying sign?

2 Responses to My 11 Year Old: The Loan Shark?

  1. Mike says:

    My take on this is that it seems that Noah needs a little financial education. If these passes were that easy to acquire then why didn’t he pay Tom back as soon as he acquired a pass or two instead of waiting 20 days? I will give Noah one thing and that is he at least honored the agreement and gave Tom the 20 passes owed. Most kids would have just blown it off. So maybe Noah did learn something from this, whether he liked it or not. LOL! Thanks for the great story.

  2. Enrique says:

    I like the idea your son had. At the same time the lady is right, but I don’t think your son had in mind taking advantage of his friend.

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