Sometimes financial lessons come from the most unlikely places.
Six Year Old: "Mom, can I get my allowance for the whole month like my sisters?"
Mom (thinking that she is tired of keeping track of allowances): "Sure. Here's your $6.00 for the rest of May." (She gets $1.50 per week, and there were four more Sundays in May.)
Mom returns to her activities, and then the six-year-old shows up crying.
Mom: "What's wrong?"
Six Year Old: "I had to pay back my sister for the money I spent at the yard sale, and now I only have one dollar and twenty-five cents left for the rest of the month!"
Mom: "What did you buy at the yard sale?"
Six Year Old: "A teddy bear."
Mom, alarmed: "How much was the teddy bear?"
Six Year Old: "Five dollars. But my sister told me she would buy me a stuffed animal at the yard sale."
Big Sister: "I said I 'might' buy you a stuffed animal. When you bought the teddy bear, you 'borrowed' five dollars from me.
The conversation went downhill pretty quickly from there, with other siblings adding their opinions about how the situation had occurred, and Mom (me) being pretty much disappointed at the whole thing. There is good news, however. While I wasn't able to turn back the clock, at the end there were several learning moments. What's amazing is how much they apply to adult life as much as six-year-old life.
The Actual Price Matters
Make sure the price is right before you buy. Your right price might be different from someone else's right price, and that's OK. What is important is that you understand the cost, that you are happy with the price, and that you are focusing on the price and not the other issues, such as financing arrangements, rebates, or other benefits. Car dealers are notorious for focusing on the monthly payment and not the price of the car, but cars aren't the only place where it is easy to get distracted from the bottom line.
Understand the Details
Make sure all the parties understand and agree to the details in a financial deal. In my family's situation, there seems to be a lot of confusion about the negotiation and its outcome. All aspects of any agreement need to be clear to all the parties involved. It is always wise to have a written document that lists all the terms of the deal - don't rely on verbal agreements.
Debt Erodes Your Future Spending Power
If you owe someone money, you'll have to pay it back, and then you won't have as much money in the future. There are some times when a loan might be necessary (like with a mortgage), but keep the repayment in line with your budget and make sure that it is completely manageable.
Families and Money Probably Shouldn't Mix
Don't borrow or lend between family and friends. There are certainly situations where this is either desirable or inevitable (you go to a restaurant and discover that you left your wallet at home), but make sure to pay your personal debts as quickly and directly as possible. It is so sad to see friends or family members who aren't enjoying their relationship because of a loan between them.
Who knew that a yard sale transaction between a six and eight year old could provide so many educational opportunities? I hope that my kids have learned a little from this experience (and I'll be telling the story many times in the future). I also hope that I can keep these lessons close to my heart and use them as well.
