Thursday, November 17, 2005

The Kid Bank

If you're kids are a little older than I am and are beginning to understand the concept of money (something I hope to be doing soon), I think that you should encourage them to be entrepreneurs. Not only will this teach them basics about money and business at an early age, it will also make it a lot more likely that they can fund their own college education instead of relying on your bank account.

The Kid Bank offers low-interest business loans to children 18 years old and younger. In order to get the loan, you and the child need to complete an application, including the project description, references and a business plan. You also have to figure out projected income and expenses.

The interest rate is "2% below the national rate" and repayment is structured on the projected income. This is a wonderful way to teach kids hands-on about money and business. It's a wonderful opportunity to help your child take a hobby or interest and turn it into a money making venture - something that will be a valuable lesson for his or her entire life.


ncnblog said...

While I think it is a great idea to encourage kids to learn about business, finance, and money...teaching them to BORROW in order to pursue their business plans is, quiet frankly, ridiculous. It is bad enough that most ADULTS think that they need to go into debt in order to accomplish their financial goals, NOW we are going to teach our KIDS that they need to go into debt. Crazy...

Still love your blog...

margot said...

On this issue I have to disagree. There is a difference between financing a business plan on credit cards and one where you must have your business plan vetted by someone who is willing to invest in it.

If you write a business plan that is not feasible, you will not get any money to run your business. The bank needs to be confident that you will be able to succeed and pay the money back. You have to show why the business will work.

On the other hand, parents can give the money to the child without going through the entire process. What will they learn from this? That money is easy to get and there is no need to make a plan beforehand.

It's the process that is a valuable lesson. Even if they don't succeed, it is much better to learn from it at an early age and get better as he or she gets older. Then when they are adults, you can have confidence that they understand what borrowing means.

And I think this all at 4 months, but then again, I'm liable to change my mind as I get older (^_^)