Do you remember your first loan you borrowed? Perhaps it was a student loan. Maybe it was a department store credit card. But more likely it was a loan from your parents.
My first loan from my parents is still amazingly vivid in my mind. My sister and I shared a bedroom and we really wanted to have a small black and white television in our room. (It was the 1970’s. TV technology has come a long way since then!) I think I was about eight years old and my sister was about eleven. My parents agreed that we could have the TV, but we had to pay for it ourselves. It was my very first purchase on credit. I don’t remember exactly how much the TV cost, but I think I had to repay somewhere in the neighborhood of $30 for my half of the TV. Quite a lot for an eight year old in the 1970’s. My father was very legitimate about the whole thing. He had ledger sheets where he tracked the balance due. I would save my change and make payments from my allowance and birthday and Christmas gifts. And within a year I had paid my debt.
While my father did not charge me interest on this loan, he did teach me some very valuable lessons about purchasing on credit. I learned the importance of making regular payments. I learned the joy of watching my debt amount decrease. I learned the pride of having successfully made a fairly major purchase. I learned that sometimes you have to sacrifice the things you want to make payments on debt. Debt is an obligation. Credit allows you to buy things without having the money on hand in advance, which is very helpful for expensive things like houses and cars and higher education. But paying it off…that’s freedom!