A conversation with the Bank of Dad
Dad's bank is open for business, kids, so let's talk money. What do you know?
When it comes to money matters, my two kids manage their personal finances in completely opposite ways. In fact, it is utterly amazing to me that my children are even related.
My daughter, Lenina, likes to set goals and save her money. On the other hand, Matthew, who’s two years older, can’t spend his money quickly enough. If the only item left at the local Quickie-Mart happens to be a 50-cent box of broken toothpicks and my son walks in with a shiny Sacagawea dollar in his pocket, you can rest assured that he will happily buy the toothpicks and tell Apu to keep the change.
My son’s habits are especially frightening to me. If his habits don’t change, as an adult he will quickly sacrifice his future for short-term gratification.
Kids are not born with an innate sense of how to manage money. More importantly, they have no real concept of the value of money (and truth be told, that can be said of many adults). For proof, just ask any 5-year-old how much the house he lives in costs.
I have been slowly trying to teach my kids, and Matthew especially, about the value of money and the benefits of properly managing it, but it is a tough row to hoe.
Last year I decided to gauge just how good a handle my kids had on the value of money, when Lenina was 9 and Matthew was 11. And what better way to do so then by inviting them to apply for a loan at the good old Bank of Dad?
The plan was pure genius, a classic win-win situation. I would gain valuable insight into the state of my kids’ money IQ, and they would get an interest-free loan for five or 10 bucks from dear old Dad.
When I got home from work that day, I piqued their interest by letting them know that the Bank of Dad was officially open for business. After dinner, I eagerly put my plan into action and invited the kids into my office.
Let me just say that I learned I definitely had some work to do. Just how much work did I have ahead of me? Well, you be the judge.
Me: Hello, kids, and welcome to the Bank of Dad! What can I do for you today?
Matthew: Dad! Why are you saying that? You said we could apply for a loan, right?
Lenina: Yeah, Dad. You know why we’re here.
Me: You’re right. Now do you guys want a loan or not? So just how much money are you guys interested in borrowing?
Me: Two hundred and …!? You’re kidding right?
Matthew: Can I borrow more?
Me: No. No, you can’t, son. And may I ask for what purpose you intend to use the funds?
Matthew: You mean money, right? Are “funds” money?
Me: Yes, son, “funds” is a fancy word bankers like to use for “money.”
Matthew: I want an iPod Touch like Mom has.
Me: And what’s wrong with the iPod Nano you got for your birthday?
Me: What about you, Lenina? How much do you plan to borrow? I bet you could use five or 10 dollars right about now, huh?
Lenina: I need $150 for a new wireless keyboard and mouse.
Me: Well, that’s a bit more reasonable. OK. How do you kids intend on paying the money back?
Lenina: You mean we have to pay it back?
Me: That’s why they call it a loan, Sweetie. Now do either of you have a steady stream of income?
Matthew: What’s an income?
Lenina: Dad, can you please talk so we can understand what you’re saying?
Me: An income is how much money you earn from doing things like your chores, or getting money for your birthday.
Lenina: It depends on how well I do my chores. Probably like $3 to $5.
Me: Is that per year?
Me: Per month? Per week?
Lenina: Dad! Yes, per week! You’re being silly.
Me: Sweetie, I’m only doing due diligence. This is the Bank of Dad -- not IndyMac. We don’t do “liar’s loans” here.
Lenina: What’s that?
Me: Never mind. Son, how much do you earn?
Matthew: I make about $20 per month doing chores if I don’t spend it all.
Lenina: This is fun! Are there more questions?
Me: Of course there are more questions, Sweetie. You know you’re asking me to loan you guys a lot of money. And if I am going to loan you a lot of money, I first need to know if you have any collateral.
Lenina: OK, Dad. You’re doing it again. What does that mean?
Me: Collateral is something that you agree to give me if you are unable to pay me back the money I loan to you.
Matthew: I’ll give you my computer.
Me: You mean the computer I paid for and gave to you last year?
Matthew: Yeah, that one.
Lenina: I promise to work extra hard and make lots of lemonade and sell it.
Me: That is not collateral, Nina.
Lenina: I like all these questions!
Matthew: I don’t. Are you almost finished, Dad?
Me: Almost. If I offered you guys a job that required you to work every day for a whole month, how would you want to be paid: a flat fee of $10,000 for the month, or a penny on the first day and doubling it every day after that for 30 straight days?
Lenina: Let me figure this out. I’m not sure, but I think the other way is better.
Me: Why is the other way better?
Lenina: Cause I think it is a trick.
Me: How much money do you think Mommy and Daddy spend each month to keep a roof over our heads and pay all the bills?
Lenina: $20,000 per month.
Matthew: Not a lot, because you and Mom don’t throw a lot of parties, so our electricity bill is probably pretty cheap. Maybe $12,000 per month.
Me: I’m just curious, Matthew. If you decided to move out today, how much money do you think you would need to earn each month to pay for all your bills?
Matthew: I don’t know, Dad. I’ll guess maybe $3,800 per month. But what does this have to do with getting this loan?
Me: Nina, can you tell me when you get old and are ready to retire …
Lenina: Like Nana and Papa?
Me: Yes, Sweetie, like Nana and Papa. As I was saying, how will you be sure you will have enough money left to pay the bills every month after you retire?
Lenina: You mean because they don’t have a job?
Me: That’s right.
Lenina: I would gamble at the slot machines.
Me: Thanks, kids. I think we’re done here. Your checks are in the mail.
Related reading at Len Penzo dot Com:
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