When Marie van der Watt from the Standard Bank Knysna branch was approached by one of their long standing customers, she did not know that she would be taking on more of a teaching role than a banking one. Standard Bank asked Mark & Whinny Orpen to share their story of how Marie helped their 10-year old son Matthew learn more about money and banking.
Save or take a loan
“In June last year Matthew insisted on an expensive new toy after his birthday, far in excess of cash gifts he received. We decided another life lesson was in the making and gave him the choice of saving up for it or taking out a loan. His uncontrollable desire for the toy, a radio-controlled helicopter, exceeded our hopes of any logical disciplined year of saving. So we approached Standard Bank to participate in the planned life lesson. Dad would actually finance the cash loan, the bank would play along as if providing the money directly and Matthew would surrender a couple of his best toys as interim collateral to be `stored’ at the bank. We briefed Mathew on the principles, nature and core features of a loan facility and the responsibilities of honoring the repayment plan. Despite the consequences of having to give up his 10-wheeler skateboard and latest Nintendo Wii game, raise money through home chores and academic achievement at school and settle the debt within six months, Matthew still insisted he needed the toy immediately and opted for the loan option.“
“The process began with a formal meeting with Marie. Matthew completed application forms and Marie explained basic loan facility rules and repayment terms including interest. He presented his toys as surety, the value was agreed to cover the loan and he was given a receipt for keeping the collateral in the `volt at the bank’. Sounds exciting, but the experience was quite intimidating for our 10-yr old, and after signing the forms, Matthew cautioned, saying: `I don’t know if this loan is the right thing, I don’t know how I am going to pay it back!’ Too late
So he marched out to the toyshop, purchased and started playing with his remote controlled helicopter toy. Being continually encouraged to enjoy the toy by his parents whilst being reminded weekly of his commitment to repay the loan, Matthew took his `pocket money earnings and penalty chart’ more seriously than ever before. He started by renegotiating some of the earnings for certain chores. Despite doing certain chores that were previously `impossible’ to perform he also took his academic achievement more seriously; by achieving high marks for each standardized subject test, he earned premium returns.”
Stress of debt
“Matthew soon decided for himself that the stress of his debt was counter-productive to the enjoyment of his toy, and so he insisted on reducing the repayment term from six months to five. The pressure to commit to school test results was paying off; he improved his test results dramatically for almost all subjects during that term. Every month Dad & Matthew would go into the Knysna branch and Matthew would complete a deposit slip, sign it and hand in the cash he had earned to Marie who escorted him to the counters and simulated a cash deposit.
Settled the debt
“Within five months Matthew settled his debt to `the bank’ whilst interestingly growing less interested in the `new’ helicopter toy. The day for Mom to drop off the `goods stored in the volt’ so that Dad and Matthew would collect this collateral had arrived. Marie arranged with management to take him into a back room to collect his skateboard and Nintendo Wii Game. An exciting day for Matthew to be released from the debt-bondage and to have his sorely missed toys back again. With a smile from ear to ear, he left the bank with a trusted friend in Marie having gained confidence in his ability to earn. And he was certainly in no rush to borrow more money to fulfill his desire for toys.”
Life lesson learned
“But the greatest lesson of all was that when the motivation to achieve is strong enough, Matthew would and did succeed. His confidence grew and his discipline for completing his schoolwork has improved.
“Thank you to Standard Bank and well done to Marie for contributing to this important life lesson that will continue to shape Mathew’s view of money, finance and self-management into the future.”