An inquirer to the Christian Science Monitor’s financial blog “The Simple Dollar” poses this real life scenario:
“I’m 22 and have very robust finances…My dad recently suggested to me that instead of paying his credit card company interest (~20%, he thinks) on his balance (~$4000), I could lend them the money to pay it off in exchange for something like 10%….This is money I can afford to lose, and would otherwise be sitting in a money market or bond index fund. So my question: is it unethical to charge my parents interest, at least more than I’d earn otherwise? While 10% is much lower than their current payment, it’s much higher than I’d earn otherwise. If I’m willing to lend them the money at a lower rate, am I ethically obliged to?”
The Christian Science Monitor’s guest financial advisor, Trent Hamm’s answers: No, it’s not unethical, just unwise, because such situations often lead to family rifts.
He’s right about that, but it is definitely unethical to charge one’s parents high interest on a loan when the money would be earning less where it is now.Unless there is family tradition of making kids pay the interest accrued on all the money their parents spent on them during their first eighteen years or so, an adult child charging anything but minimal interest on a moderate-sized loan to a financially strapped parent is ingratitude, pure and simple. Greedy too.
It is answers like Trent’s that make the public wonder what kind of ethics they teach in business school.