SINGAPORE: A man took to social media to ask other Singaporeans, “If you lend money to your children/spouse, will you charge for interest?”

“I had a discussion with my friends, and we are having various thoughts about it. Will it make them take the loan more seriously?” the man wrote on r/singaporefi on Friday (Mar 8). “Teaching children real-world lessons may be for the cheaper interest (like 0.1%).”

The man also said he became curious about this because two of his friends told him they borrowed money from their parents to pay for a car and a condo. One friend paid the interest, but the other didn’t. This made him wonder what to do if he were in their parents’ shoes.

“What do you guys think? Is anyone doing something like this?” the man asked.

“Then what is the meaning of family? You are teaching your child the wrong meaning”

Singaporeans criticized the man for suggesting the idea of charging interest to his partner and kids, highlighting the negative impact it could have on their relationships. 

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Many felt that it would be challenging to be in a relationship with someone who would consider such an approach.

Furthermore, they emphasized that a more constructive approach would be to educate his partner and kids on financial literacy without charging interest.

One individual said, “Then what is the meaning of family? You are teaching your child the wrong meaning, next time they will do the same to you with the context of “teaching””.

““Family always come first” that should be the message.”

While another explained, “Charging interest on a loan is not merely a method for profit; it serves as a compensation for the loss incurred due to inflation over the loan period.

It may be more effective to communicate that what is being lent is not simply money, but rather its value, which may diminish over time due to inflationary pressures.”

Some also advised the man to only lend money with the mindset of giving it away, suggesting that if he couldn’t bear the possibility of not getting it back, he should simply learn to decline the request.

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Others, however, openly admitted that they would contemplate charging interest if their own children were to spend money on non-essential items.

One individual said, “For context- if my own children needs and I can afford, I will think about it, will just reject if intending to buy atas car or things which I find overly luxurious. So either I lend it to them with no intent of interest, or I reject.”

Why do moneylenders charge interest in the first place?

As per Investopedia, moneylenders charge interest because of the inherent risk, meaning they’re considering the possibility that they might never get it back and because of the impact of inflation.

When funds are loaned out, future inflation could reduce the purchasing power of the initial amount. Interest, therefore, serves as a protective measure against this loss and effectively safeguards the lender’s financial standing.

Moreover, financial institutions rely on interest income to cover operational costs.

From the borrower’s stance, paying interest is like paying the price for a shortcut. Instead of waiting years to save enough cash, they can now get what they need.

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Take, for instance, buying a condominium or a car. Not everyone has the money lying around to buy one right away. So, they take out a loan from the bank, which lets them purchase these things in the present rather than waiting ages down the line.

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