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I charged my kids interest on loans, and now they’re outsmarting me

For this week’s Making Sense report, economics correspondent Paul Solman visited New Belgium Brewery headquarters in Fort Collins, Colorado, a company that is owned entirely by its workers. A key feature of New Belgium’s employee stock ownership plan is its open-book management and its classes that teach every employee how to read the books.

While taking those classes, 20-year employee Doug Miller, known by co-workers as “Corleone,” learned about cash flow, income statements and balance sheets — and then shared that knowledge with his teenage kids. Paul caught up with Doug on his forklift, where Doug explained precisely how he taught his kids financial literacy. Little did he know how savvy they would become.

Paul Solman: I thought your name was Doug Miller.

Doug Miller: It is, but it’s kind of an inside joke that I am the guy here that gets things done as long as you don’t ask any questions about how it got done or where that went to or anything else.

Paul Solman: And you’re teaching open book management or financial literacy to your kids?

Doug Miller: Yeah, that’s the pretty amazing thing to me. My kids, a couple of years ago, I started making them save 10 percent of everything they made, and they put it in this jar. And then after the end of the year, we crack open the jar, and I’ll add 10 percent to that. And they started understanding how the world works with money. Like interest rates: My kids borrow money from me, because they didn’t save money, and I charge them 5 percent interest per week.

So I teach them that when you borrow money, you’ve got to pay interest on it. So my son borrows 20 bucks, and I’m like, “You got to pay me back.” So he starts paying me back a couple of dollars every week, and a couple of weeks go by and he is like, “Yeah, so you owed $20, I paid you back $8, and I owe you $12.” And I am like, “No, no, here is the interest.” And we do the math, and he still owed me $17.25, because of the interest rate common. He runs upstairs, cracks open his piggy bank, dumps it all out, and says, “I’m paying this all off right now.” And I am like, “Good for you, you learned a lesson.” Two weeks later, my daughter goes to borrow money, my son is like, “Don’t do it, don’t do it. It’s the worst thing ever, trust me.” My daughter is like, “No, no, I got this.” I am like, “Alright.”

So a couple of days later, I’m like, “So you don’t need to borrow that money?” She is like, “No, I borrowed it from Calvin.” I am like, “Oh my god,” I go to Calvin like, “You lent her the money? What’s going on?” He is like, “Yeah, I only charged her 4 percent, and you were charging her 5 percent.” So I go by my daughter and said, “Hey, you’re still going to have to pay him, I don’t want to be involved with this thing, and whatever.” And she was like, “Don’t worry Dad, you charged interest after one week, he is charging interest after two weeks. And I have that babysitting job with the Bankstons next week, and so I’ll have the money to pay him off interest-free.”

Paul Solman: And how savvy have the kids become?

Doug Miller: A little savvier than I would like, actually, to be truthful. My oldest son is so good at managing his money — the little that I give him — that he doesn’t need to get a job. And he is like, “Why do I need to get a job? I can get by on what you’ve given me, and I am spending less than I make.” My middle son — he’s the banker — he loans money to his friends. He has loaned money to his one friend at 1 percent interest per month. And his father actually called me up and said, “Hey, your son is loaning money to my son at interest rate, and I got to sign something for this?” I am like, “Yeah, it’s all on the up and up.” And so that guy was like, “Wow, that’s a really great idea, I’ll start teaching my kids about money and then maybe they won’t have to borrow it from your son.”

Paul Solman: You mean your son loaned money to his friend on the condition that the friend’s father co-sign the loan?

Doug Miller: In real life what people do is, they have a co-signer. When I bought our first house, back on McKinley, I had to have Nanny and Pappy co-sign with me, because the bank knew that I wasn’t a good risk at that time. So you need to get this kid to have somebody co-sign it for him. And so yeah, he get his dad to co-sign the loan, and you’re good to go.

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