It’s never too early to share some of the fundamentals of money and business with your kids. Opening their eyes to see the business side of things around them can actually be really fun. And, why not help them start to be smart about money decisions that will apply to their personal relationship with money and perhaps start a budding relationship with business? We’ll share some of our own experiences and some opportunities to give your kids some insights into this world.
Think your kids will know what to do with the legacy you leave them? If not, here are a few ways to ease into the conversations and educate your kids in a practical everyday manner.
- Start the Conversation – In our house, we tend to come upon a common life situation and discuss it with our kids. For example, at a local hand car wash, we opened the dialogue with our kids about how much money the owner of the car wash might make. We paid $35 for the wash. We looked at the number of cars possibly washed per day, the number of days and the average cost of a wash. We subtracted an estimate of some common expenses (a list we asked our kids to help us create based on what they saw) and came up with our answer. Our kids walked away from that experiment eager to learn more. In fact, later that summer, we pulled into a “do it yourself” car wash where you drive-in, grab the spray hose after inserting $5.00, and go to work. Our daughter immediately asked what we thought this car wash owner made. So, we talked about the number of stalls available, the number of washes estimated on a given day (our estimate based on what we saw that day) and the estimated expenses. Our kids figured the expenses were significantly less than the “hand car wash” due to the fact that virtually no employees were needed and that there was a time limit on the water as well as a limited amount of soap that could be used.
- Talk about it often – The car wash experiment has morphed into many a discussion. While on our annual Michigan vacation, we’ve discussed the cost of getting ice cream at “Oinks” Ice Cream Parlor and how much the owner must make. (We all agreed, a lot! It’s delicious!) We’ve talked about how much our Michigan cottage rental provides the owner per year and how much the canoe rental owner likely made for 3 months out of the year. For the canoe business owner, we estimated 5 days per week, 6 hours a day at $25 per hour and 10 canoes running per hour. We estimated this for 3 months giving us income of $90,000 in just 3 months. This exercise gets easier as the kids learn the quick ways to estimate by rounding and gets more fun as you go along.
- Introduce them early – So often, parents think talking about money with their kids may be too overwhelming. While you probably don’t want to tell your 6-year-old all of the details of purchasing your home: about your mortgage and down-payment… You do want to consider beginning to share other details with them as early as possible. For instance, at age 7, our son was interested in the riding lawn mowers we would pass while walking into the local hardware store. He was always curious to sit on them and wanted one himself. By the time he was 9, he hadn’t stopped with this curiosity, and we couldn’t get in the door during the summer without him selecting and sitting on his favorite. Only by this time, we began to show him the price tags and the different features and benefits of the mowers. He began to see that the more features and benefits, the higher the price. He also began to learn what something like a mower could cost as well as that “special” thing known as “On Sale.” He learned that from time to time, with patience, you just might happen upon a sale, especially at the end of the season. As he learned more about something he aspired to have, including the cost, he began to try to figure out how he could buy it. We would say, save up your money. He soon began figuring out when he might receive money that could be saved for the mower. And by age 10, started a lawn service for our neighbors where he would mow, edge, and water for them while they were on vacation during the summer for a set fee. Thus, he found a way to earn and save.
- A simple way to educate on “what to do with it once you get it” – While you can begin by buying those shares of Disney or Tesla and involving your kids in researching the companies and following the news on them, there is also another very simple way to start. A simple savings account is a great way to teach them about the compounding of interest. We’ve heard our son say, “Wow, I earned a penny this month!” Careful Mom and Dad, don’t open your mouth too soon to indicate how little you think of that penny earned, your kids may think otherwise. With eyes wide, my son learned quickly about earning interest on his money and was excited about it. We now review the monthly account statements together, and he has been able to see his $1000.00 increase to 1000.15. Not a lot, however, he has learned about the compounding of interest.
So, starting the conversation is important and a great way to do it is by picking something that you do often and looking into the components of it as a business. Ask your kids to think about whether or not they think it’s a good business. In other words, how does the money work within that particular business and do they think it’s worth it for the owner?
What we have learned by starting conversations like those we’ve described is that kids become more curious about money and how it works. Without the conversation, they may be forced to learn when they’re thrown into situations later in life, and these exercises may help to save them stress and money down the line. Why leave it to chance? Start the conversation now.
Important Note: The views expressed in this post are as of the date of the posting and are subject to change based on market and other conditions. This post contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Please note that nothing in this post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and should not be taken to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Lenity Financial, Inc. unless a client service agreement is in place.