Category Archives: Entrepreneurship

Learning to Say "Go Ahead!"

I have a confession to make — I don’t pay my kids an allowance.  I know this may sound surprising given that something like 80% of kids in this country earn allowances for doing chores. This doesn’t mean that my boys are off the hook, though — they do daily chores, too, and are experts at setting the table, loading and unloading the dishwasher, sorting laundry, taking out the trash.  I just don’t pay them for it.  My philosophy is that we are all part of the family and, as such, have a role in taking care of our house. 

Without an allowance, the logical assumption would be that my husband and I buy everything for them.  Well, not so much.  We certainly provide everything they need and, for birthdays and holidays, some of what they want.  But otherwise, they cover most of their own expenses now.  Cool new Nerf gun? Ninja t-shirt? Mats for their “warrior training” space?  It’s all on them.  For something expensive, like a new bike or the Trackers’ Earth apprenticeship program that Sam is interested in, we negotiate a cost-sharing split — sometimes it’s 50/50, sometimes it’s 80/20. 

So how do they come up with the money to pay for these things?  They have their own business.  Last year, when Sam was 10, he started asking questions about jobs and how people earn money.  We explained that most people work for someone else, but that some people start their own businesses.  Around that same time the opportunity came up to participate in an Entrepreneur’s Fair through our homeschooling group, so we signed both boys up immediately, thinking this would give them a deeper understanding of business concepts.  They each decided what they wanted to make, purchased their own materials (with a loan from their parents), made their own products (holiday decorations), and sold them at the fair.  They learned first-hand about cost of goods sold, labor, marketing and sales, loan debt (yes, we charged them interest!), and profit.  But surprisingly, what they really came away with, was an enthusiasm for entrepreneurship.  In fact, we barely made it to the car after the fair before both boys were brainstorming other businesses they could start!

Now, I should pause here for a moment because, if you know anything about our family, you’re probably guessing that my husband and I had a significant role in encouraging this idea of starting a business, given that we’ve both have a history of starting our own businesses.  You’ll just have to take my word for it — the idea never crossed my mind.  Yes, I wanted them to learn about business, and apply some math concepts in the process, and Dave wanted them to see what it’s like to really work. But neither of us had any ideas about an ongoing venture.  

So, we followed their lead, and helped them brainstorm ideas for a couple of weeks, until we finally landed on the idea that is now the company called “The Can Men”. Every Tuesday night the boys take their clients’ trash and recycling cans to the curb, and then return them to their original places the next day after the trash trucks have come through the neighborhood. To start, they had to figure out their own pricing, develop their own flyer, and then knock on doors to find clients.  Most of the people in our neighborhood signed on, and now the boys make a nice monthly income.  Sam is technically the business owner, which means he took the lead on the sales, does the monthly invoicing, and earns 60% of the revenue.  Tips (which they get regularly) are split 50/50.  And best of all, there were no start-up costs!

Now that “The Can Men” has been in business for about six months, I know that what they’re learning is immeasurable — there’s absolutely nothing I could teach them, or that a teacher in a classroom could teach them, that would compare.  And whatever they choose to do professionally in their lives, whether they work for someone else or not, there’s no doubt that they’re forming the foundation for their choices now.  If your kids have entrepreneurial leanings, or even if you’re not sure, I highly encourage you to consider and explore the possibilities with them.  There’s no doubt that you’ll be opening new doors into their future.  Still not sure?  Take five minutes to check out this video of young entrepreneurs talking about their families:  Entrepreneurs Love Their Parents 

Getting started may be as simple as just learning to say “Go ahead!”

The Most Valuable Inheritance

The next time I need a loan, I’m going to ask a kid. I read a survey this week, conducted by the American Institute of CPAs (AICPA), that most kids over 8-years-old receive an allowance at an average rate of $65 a month. What’s more, almost half of school-age kids get paid for good grades, too. (What’s an “A” worth? An average of $16.60!)  It turns out that doing chores (89% of kids do) and getting good grades can be quite lucrative! (Note:  see an earlier post on why I think paying for grades is a bad idea: Pay for Performance?)

And what do children do with this annual income of almost $800? (Not including money for good grades, or birthday and holiday money from the grandparents). Spend it! Only 1% of parents say that their kids save any of their money.  This isn’t surprising because most parents also reported that money is not a regular topic of conversations in their family.  Other topics that are more frequently discussed:  good manners, good eating habits, good grades, and staying away from drugs and alcohol.  

It might be easy to think that “kids will be kids” at this point, and assume they’ll learn about managing money when they get older, but this doesn’t appear to be the case. According to the US Department of Education, high school students who took the National Financial Literacy Test in 2010 only answered an average of 76% of the questions correctly.  In 2011 it was worse — the average score was 69%.  The Jumpstart Coalition, a group that also administers a regular financial literacy survey to high-school seniors, reports even more concerning results.  On their 31-question financial literacy survey, the average score was 57% in 1997, and fell to 48% in the 2008 survey — both failing grades.

So, maybe high school is too soon to really understand concepts like compound interest, inflation, and investing.  They’ll get it when they’re in college, or when they get their first job, and have to pay their own living expenses, right? Not so much. In a 2010 Northwestern Mutual Life Insurance study on adults’ general financial knowledge in the US, 69% of study participants failed the quiz.  The SEC summed it up in their report on financial literacy, issued in September of this year: “American investors lack essential knowledge of the most rudimentary financial concepts:  inflation, bond prices, interest rates, mortgages, and risk.

And the fallout of this lack of financial knowledge is actually frightening:

  • According to the Center for Retirement Research at Boston College, of all Americans who were approaching retirement in 2010 (ages 55-64), 75% had less than $30,000 saved for retirement.   
  • Adults currently in their 20s already have an average of $45,000 in debt, in conjunction with an unemployment rate exceeding 12%.
  • About 40% of American youth between the ages of 13 and 22 years of age report that they expect to inherit money from their parents, and therefore rank “saving for retirement” low on their list of financial priorities. However, only 16% of their parents actually plan to provide an inheritance (2012 TD Ameritrade study).

Clearly, we’ve got a problem — a big one.  And we can’t just blame the economy for it.  The truth is that we don’t understand money, and this has a huge negative impact on our lives at every stage in every economic environment.  But the good news is that we can learn, and so can our kids. Of course money and finance can be intimidating, and facing the bad news of our own situation is a difficult thing to do. I’ve found that breaking the process down into smaller steps helps me significantly — I can spend 15 minutes a day doing anything. And if I focus on one thing per month (this month, for example, is “college savings” month), I don’t feel so overwhelmed.

So where to begin? I started with taking the National Financial Literacy Test myself, to see where the gaps in my knowledge are (it was actually kind of fun since I didn’t have to tell anyone how I did). Next, I looked around for information and programs I could use to learn more. Here are several that I like:    

  1. AICPA Financial Literacy Program:  The information here is very straight-forward and accessible, organized by age and topic. Great place to start!
  2. How To Raise a Money-Smart Child:   This is a guide published by the JumpStart Coalition that all parents should read. It breaks down money topics into family-related categories, and provides ideas on how to talk to your kids about them along with related activities. 
  3. Feed The Pig:  This site is a little more “fun” with lots of multimedia, including a talking pig. I turned the pig off whenever I could, but I liked that you can take a quiz and personalize your own savings plan — good tool for teens and younger adults.
  4. Tykoon:   I just signed us up for this one. This is a new site for parents and kids that helps kids think about money and set goals in four basic categories:  earn, save, give, spend.  Each category has “cash” and “non-cash” options (like earning extra TV time).

Why not begin right now?  Take 15 minutes to check out one of these resources (or any others that you like), and choose an area to focus on this month. Next, involve your kids, too! Because whether or not we decide to leave our children an inheritance, ensuring that they can effectively manage whatever money they do have is the true gift.