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Monday, November 12, 2012

Let Mickey Mouse Work For You

One way to teach kids about how money works is to explain to them that the things they love the most are companies owned by someone or often times many people. Their favorite hamburger place, toy store, yogurt shop, movies, or amusement parks are all someone's assets used to put money in the pocket of the owners. Without the owners we would not have these favorite things in our lives.

Not only are many of these companies owned by many people but often times they are public companies and can be owned by your child.

The concept of a public company can be difficult for a child to grasp. We need to break it down and make it visual. Think of company ownership as a big puzzle. They break the company into millions of puzzle pieces and then sell each piece. Selling stock/puzzle pieces raises money which is used to make more movies or toys to sell. The more toys they sell, the more money the company makes (profit). As an owner of the company you will get a piece of the profit back in what is called a dividend.

Encourage your child to buy pieces of companies of their favorite things.  To make it visual you can decorate puzzles pieces and put them in a photo album or scrapbook.  You will know your child has grasped the concept of company ownership when they insist on buying friends and family gifts made by the companies they own so they can make more money!


As Christmas rapidly approaches, I challenge you to buy your child or grandchild at least one asset to go along with all those toys (liabilities) you have planned to buy.  Buy them a scrapbook as a visual symbol of their company, stock for one of their favorite places or things,  and their first puzzle piece to put in their scrapbook.  While I am not a licensed broker and cannot recommend specific stock to buy I will share with you my son’s portfolio of companies he has purchased or been given as gifts to give you a feel for stock prices of the things that he loves.

Company (Stock Symbol)

Price/share as of Nov 9, 2012

Ford (F)

$10.93

Disney (DIS)

$47.06

John Deere (DE)

$84.29

Leap Frog (LF)

$8.29

Target (TGT)

$62.02

For a fun and simple way to teach your child what a company is and how it works check out "A Day At The Carnival".

Monday, November 5, 2012

The Bounce

From the time he could talk, I taught my son very simple definitions of assets and liabilities. This came in handy for his 5th birthday. Our hometown had recently added a business called The Bounce. They had inflatable slides, bouncy houses and mazes. We had been to several birthday parties there and my son was looking forward to celebrating his 5th birthday party there. The Bounce was strategically located next to Toys R Us. We would frequent it often during the holidays to buy cousins and friends Christmas gifts. One heartbreaking day we noticed The Bounce was closed. Upon further investigation we discovered they had gone out of business. My son took the news hard and personally. He could not understand why they would close knowing he wanted to have his birthday there in just 2 months. Equipped with very basic definitions of assets and liabilities, I was able to teach him a grown up concept that even a 4 year old could understand. The conversation went something like this.  

Mom: "do you remember what an asset is?" 

Son: "puts money in your pocket" 

Mom: "do you remember what a liability is?"  

Son: "takes money out of your pocket." 

Mom: "every company has both assets and liabilities. To go to the bounce you have to give them money. That is how they put money in their pocket. There are also liabilities that take money out of their pocket. They have to buy the bounce houses. They have to pay to turn their lights on and they have to pay the people that work there. Unfortunately more money came out of their pocket than went into their pocket, so The Bounce ran out of money and was a liability."

Son: "oh"

Now I realize this is an over simplification and with a tepid response of "oh" I was not sure if message delivered was message received until about a month later his preschool teacher sent home a note saying my son had taught the class about assets and liabilities. When I inquired the next day, his teacher said another student brought up The Bounce and Sam explained to the class AND the teacher what assets and liabilities are and why the Bounce was a liability.

Kids are sponges wanting to soak up information. I often hear from friends that because my son has a working knowledge of financial concepts that he must be really smart. As his mother, of course, I want to believe this is true and who knows he may turn out to be brilliant, but the reality is he has simply been exposed to a topic that most kids (and adults) are not exposed to. My hope is that he will be smart, but my goal is to be intentional and diliberate in teaching him financial concepts so where ever life takes him he will be smart about money.

I have looked for a developed program, ciriculum, or at least educational videos to teach kids about money, but I found very little. I have discovered there are many opportunities day-to-day life presents to teach us how money works. Because of this, we have decided to document our learning experiences through inexpensive electronic children's books that will teach financial concepts even a 5 year old can understand. Our goal is to peak the interest of children, lead them to ask questions, and bring out the entreprenueral spirit in them. Check out A Day At The Carnival and begin the journey with your child.

Thursday, October 25, 2012

Making Money is Making Money...Right?

We tend to focus on “making money” to become wealthy, while necessary, it is only one small piece of the pie. Much more important, is the type of income you are generating and how you spend your income.  Before we can dive into income we need to define wealthy so we will know when we have achieved it. 
 

WHAT IS WEALTHY?

 
I have heard many definitions of wealthy, most of which are complex and require a financial dictionary to understand. To me, wealthy simply means I have more income from assets than I have in total expenses. In other words all of my expenses are paid for with the income collected from assets. This is a concept I was first exposed to reading Rich Dad Poor Dad 10 years ago and it resonated with me at the time and has stuck with me. In this definition my expenses drive my need for income. If I have very low living expenses, say $1,000/month, then I only need $1,000 from income each month to be wealthy. On the other hand, if I have extravagant taste, fancy cars, a big house and expensive vacations I will need a lot more income from assets to cover my expenses.
 

TYPES OF INCOME

 
To fully appreciate this definition of wealthy you need understand that there are 3 types of income.
 

Stick with me, sounds complicated but we are going to break it down so that even a preschooler or elementary student can understand it. Earned Income is money you make for performing a task or service. It is the money you work for. Your paycheck. Your allowance for performing chores. Money for mowing lawns. Lemonade stand money. The critical distinction is that if you are not present to do the work the income stops. If I do not mow lawns tomorrow, I will not get paid. If I do not sell lemonade, I will not make money. It is what most of us spend our time trying to achieve and what we help our kids obtain, however based on our definition of wealthy, regardless of how much earned income you make you can never be wealthy if this is your only source of income.
 
The other two types of income, Passive and Portfolio, is the money you receive regularly from your assets. Rather than drawing a distinction between passive and portfolio income, I want to draw a distinction between capital gains and cash flow income. These are the two ways to make money from assets. Capital gains come from buying and selling assets. For example if you buy a piece of silver for $25, hold it for a year and then sell it for $45 dollars your income is capital gains. The same would go for buying and selling real estate, stocks, bonds and businesses. While you can make big chunks of money from capital gains, it is not regular or predictable. Cash flow, on the other hand, is the regular money you collect from assets you own. For example it is the money you make on rental property, the quarters you collect from vending machines, the dividends you make from stocks, or the dividends you make from a business you own. It is more predictable and easier to plan for and should the primary income you try to achieve. I like to invest for the cash flow to pay the bills and the capital gains are “gravy on top”.
 
Now that we know they different types of income, let’s identify how you should spend each type of income your make. Earned income, once spent, is gone forever unless we get up tomorrow and go to work to earn more. This cycle is often referred to as the Rat Race. If this is how you spend your money you will wake up every day working for money. In order to become wealthy we want the money to work for us. In order for money to work for us we have to buy assets. We use EARNED INCOME to buy ASSETS. The assets will continue to produce money, even when we are not there. Now the money is working for us. We use PASSIVE and PORTFOLIO INCOME to pay for expenses (i.e. toys, nice cars, etc.) and to buy more assets.  
 

APPLYING IT AT HOME

 
Our son set up a lemonade stand on national lemonade day in May. His net profit (what he made after his expenses) was just shy of $150. With that money he tithed to his church and used the rest to buy a gumball machine. He put the gumball machine in a local restaurant. It was difficult for him not to immediately buy a great toy, but for his patience, he now collects quarters from his gumball machine every two weeks. Of that money, he tithes 10% to the church, saves 25% to buy more gumballs and spends the rest on whatever he wants. If he continues to buy machines and grow his business he will grow the amount of cash flow he makes each month and one day will have a business he can sell (capital gains). He will be able to use that money to invest in a new business or other assets. With an understanding of how money works, you can equip your children to avoid the rat race all together. Something that is unheard of in today’s society. What are you doing to give them the gift of financial freedom? Please share your thoughts and ideas here for the benefit of all us parents trying to equip our children.
 
For more on teaching your child about income, what it is, and how to apply it in their daily, check out the eBook A Day At The Carnival on Amazon.com. Subscribe to this blog our like on Facebook to be notified of future posts.

Tuesday, October 16, 2012

The Best Time to Learn About Money

I am often asked in jest what I would say if my son told me he wanted to be artist, cowboy, or any other stereotypical “lifestyle” career that is perceived to be accompanied by low pay.  Counter to what many assume, I am not trying to dictate or force a career path upon my son by teaching him how money work and financial concepts.  My goal is to provide him a sufficient financial education that when the time comes he can make a decision on career path with adequate knowledge.   
Most of us, including myself, made some of the biggest decisions in our lives when choosing whether or not to go to college, selecting our first job, and electing our lifestyle once we were “on our own”, such as, what car to drive, purchasing a career wardrobe, buying a house, etc.  What society teaches is that you should go to college, get a degree, find a safe secure job, buy a house as an investment, buy the car you “deserve”, and buy a killer wardrobe to look the part for your newly obtained job.  The result, $200,000 in debt in the blink of an eye, and that assumes you got through college without student loans.   Thus begins the rat race.  The next 20 to 30 years, if not the rest of your life, will be spent paying for those decisions and digging out of that hole.  If we had learned about how money works, the different types of income, the benefits and draw backs of each type, and the financial consequence of those decisions, we may have elected very different decisions.   With a solid financial education, we may have chosen exactly same decisions, but we would not have been surprised by the consequences of those decisions.   
My goal in teaching financial education is to empower people to make sound decisions based on knowledge.  The best time to make those decisions is before you find yourself in debt $200,000+. Since most of those decisions are made before we are 25 years old, I focus on educating children.  What are you doing to equip you and your  children with a sound financial education?

Monday, April 16, 2012

What Does Your Kid Know About Money?

Last week, my son and I were invited to teach his first grade class about money. Based on his homework from previous weeks I knew they had been learning about recognizing the different denominations of money, their worth, and how to count it. I asked my son what he thought we should teach to his classmates and he said, "How money works. We haven't learned that at all". We came up with a fun way to teach the kids how money can work for them by teaching them about assets. Now, before your eyes glass over, hang in there because believe it or not there are funs ways to teach what is perceived as a boring, useless and complicated concept to first graders. It can be done in a fun way that will have a lasting impact on how they think about money. If you are interested in learning more, I have laid out the activity we used so you can adapt it and use it as well.  Teaching Kids About Money Class Activity

The first question I asked the students was, "Where does money come from?". The answers I got were "the bank”, “mom”, “from credit cards”, and my favorite, “when you buy something and pay with money, they will give you money back". Admittedly, I chuckled a bit at the answers. They were cute and innocent, but later in the day I began to think about how kids' answers to questions are simply a reflection of what they have been exposed to. For example, my son is a big fan of a pbs cartoon, Wild Kratts. The premise is two brothers save animals from bad guys and in the meantime they teach all about the animals they are saving. Consequently, my son can regurgitate all types of animal trivia, such as, how fast and far a cheetah runs, what a stoop is, the loudest mammal in the world, how long a caterpillar remains in a chrysalis until it becomes a butterfly, and the list goes on and on. He also loves art class, which I attribute to an engaging teacher that presents the information in a fun and creative way. He frequently comes home with stories about artists they studied, the artist’s famous works, and the different experiences they had during their life. As a parent, you have undoubtedly experienced similar things with your child. As I reflected on this, it hit me like a ton of bricks; I had presented the concept of money to 21 students, of which none had been deliberately taught anything about. The irony of it is that money will impact every child in that room, and each person will have to manage money or be managed by it. All of their answers came from what they had seen or experienced but none of them had been intentionally taught about what money is, where it comes from, how it works and what impact it will have on their lives. On the flip side, had I asked them questions about animals, the state flower, the Mona Lisa or a number of other topics, they could have provided me answers. To be clear, I am not discounting this information, and believe that children should be exposed to and taught about many things. What struck me so hard was that money will impact every child in that room no matter what they go on to be, and their only exposure to it entails recognizing different denominations and counting it. 
The good news is that children are sponges, eager to learn and soak up information. Recognizing that financial education and wealth creation will not be taught in school makes it incumbent upon parents to be intentional and deliberate in teaching their kids to be financially savvy. Undoubtedly, our kids will learn how to interact with money, but left to its own accord, it will be shortly after graduating from college with student loans, a new mortgage, car payment, and the bills that go along with it. They will be in the rat race before they even know what it means, and many will spend the rest of their life trying to dig their way out.
My hope is to increase your awareness about the need to teach our children about money, and to help provide you with tools and ideas to do it. My intent is not to have all our children be filthy rich entrepreneurs, as this may not be their life’s plan nor desire, but rather equip them with the information to make educated decisions about money and its impact on their life.

Monday, April 9, 2012

Tips & Lessons Learned from National Lemonade Day

National Lemonade Day is right coming up on May 6th.  It was launched in 2007 by Michael Holthouse in Houston and last year it was brought to Bryan/College Station for the first time thanks to some great local sponsors.  The purpose of Lemonade Day, according to their website, is to provide a free, fun, experiential, business education program that teaches youth ages 5-17 how to start, own and operate their own business using a lemonade stand. The kids set up a stand for the day and sell as much lemonade as they can. They are encouraged to make and follow a budget, find an investor, chose a good location and sell as much lemonade as they can.  When I learned of the event last year I thought to myself we just have to do this!  It was going to be a great opportunity to validate the founders concept, support the local sponsors of the event, teach my 6 yr old son Sam the key elements of running a successful business and most importantly show him a tangible difference in a job (earned income) and an asset (passive income). While we had talked about the difference several times before, this would be a way for him to live it and experience it at the ripe old age of 6.    

Suspecting this was going to be a lot of work, I got my son's absolute and enthusiastic buy-in as step number one.  He loves lemonade and loves making money.  As far as he was concerned why wouldn't you have your very own lemonade stand? So we went to work. Through the process these were our take aways and hopefully they will help you if your family embarks on a lemonade stand.     

1.  Marketing: what I like about lemonade day being done all in one day is that it magnifys the concept of competition.  Having the best lemonade recipe, the best designed stand or the cutest kid (I'm possibly biased) would all get lost in the hundreds of stands the day of the event.  We developed a three-part marketing plan to try to drive traffic to our stand.  
  • First, we decided we needed something other than lemonade as a draw that we could afford. Luckily for us, a close family friend offered the use of their motorized train to give kids rides through the park which was more than we could have asked for. 
  • Secondly, created a Facebook page and documented Sam's journey leading up to the day. I would read Sam the comments and he would help come up with responses, since at the time he could not read. From our Facebook page, we got a GREAT idea from out of town friends of ours who own a marketing company. They suggested we sell lemonade on our Facebook page for friends and family who wanted to support the stand but could not be present to buy lemonade. It was a hit. It was also rewarding when the page was found by a teacher that was preparing for lemonade day with her class.  She gave Sam some very positive feedback.  You can check out his page at www.facebook.com/SamLemonadeStand. 
  • The third piece of our marketing plan was the most effective but by far the hardest work. Sam hired two employees(cousins)and blanketedthe neighborhood introducing himself and handing out around 150 fliers. For a 6,8 and 11 yr old this sounded much more fun than it actually was! However it paid off. Probably 80% of our customers were from the neighborhood fliers. With the purchase of a glass of lemonade you got a free train ride. This got us repeat customers and made some of our lemonade stand competitors customers!      
2.  Get creative to keep cost down because margins are THIN!  The goal of the lemonade stand was to teach Sam how to run a business, so there were no free rides. We kept every receipt and Sam paid all of his employees. Sam would only make money if there was some left. The largest expense items were the stand, ingredients and employees.
  • A tight budget immediately eliminated the grandiose idea of a 3D lemonade stand in the shape of a lemon. Even if dad made it, there was not enough money for materials. The stand ended up being a borrowed pop up canvas, borrowed tables, homemade poster board signs and our patio furniture under trees for customers to hang out.  
  • Sam wanted to hire everyone he knows to help with his stand!  We had to talk about what we would pay each one and how many glasses of lemonade he would have to sell just to pay for each person.  We walked through what he needed from his employees and backed into who to hire. 
  • Sam went to local businesses to get sponsors for ingredients.  Because his stand was a for-profit business and not a non-profit, it eliminated several larger business right a way.  So we focused on smaller, locally owned businesses and were able to secure lemons and ice in return for advertising them at the stand.
You may be reading this saying, "He must have made hundreds...right?"  While the day was a success and we sold out of lemonade at the end of the day, selling 277 glasses of lemonade at $1 each (vs goal of 250).  His expenses totaled $131 dollars so Sam made a profit of $146 (vs goal of $101).  While $146 is nothing to sneeze at, it was a lot of work for a onetime profit of less than $150.  

The Lessons:

The greatest lessons of lemonade day came from our discussions after all the work was done.   The greatest two lessons were:

1.  Selling lemonade at a stand is a job, not an asset.  An asset puts money in your pocket even when you are not there. Assets versus jobs is a concept I have talked to my son about on several occasions, but this was an opportunity to apply it to him.  I had a conversation with him that went something like this to confirm he got the concept.

Me:    Was working your stand a lot of hard work?
Sam:  Oh yeah!
Me:    Did you make a lot of money?
Sam:  Yes ma'am
Me:    How much money will you make if you are not at your lemonade stand selling lemonade?
Sam:  None
Me:    So is it a job or an asset?
Sam:  Job
Me:    Why?
Sam:  It doesn't make money if I'm not there.

  
It was a very simple conversation, but it illustrated the difference between a job and an asset.  Be sure to take opportunities to point out "how money works".     

2.  A person does not get rich based on how much money they make but how they spend the money they make. When our kids want something we often encourage them to save up their money or do more chores to earn the money they need to buy what they want.  We are teaching them to get a job and work hard for money to give themselves the ability to buy what they want.  This is conditioning them to join the rat race.  The reality is that if a kid makes $10 a week in chores and buys a toy for $10 every week they will always be broke.  If they make $100,000/year in salary and spend $100,000 a year in expenses, mortgage, cars, boats and a lake house they will always be broke.  On the other hand, if the $10 is used to buy assets they will have ongoing income from those assets to buy toys.  That is how they make money work for them.  When your child makes money on their lemonade stand encourage them to use the largest piece of that income to buy assets (see tab "Ways Kids Make Money" for asset ideas).  This will set them on the path to financial freedom.   

If your kid has a successful lemonade stand and uses the money to buy assets, drop me an email and share their story!

Sunday, March 25, 2012

Ways Kids Make Money

There are many lists out there that give kids ideas on how to make money.   They mostly include “work for hire” or “jobs”, such as do more chores, mow the grass, wash cars, sell your toys, etc.  While these are good suggestions on how to work for money, I want you to think bigger!  I want you to think about how to make money work for you!  It is a lesson that most people never learn, but if you can learn it early in life it could be the greatest skill you acquire. 

I have listed some ideas that are outside of the typical lists.  Some of the ideas my not work for you but the goal is to get your creative juices flowing.  I want to help you recognize there are opportunities to make money all around you.  You just have to look for them. 

1.     Put gumball, toy, and candy vending machines in local businesses around town. The machines can range from about $100 for a simple gumball machine to several thousand for the toy crane machine.  Where do you get the first $100?  That is where you do more chores, wash cars, and use your birthday money.  Or even better, ask for it as a birthday gift!

2.     Being a country girl my mind often thinks that way. Buy some egg laying hens and ask if you can keep them in a friend or family member’s hen house then sell the eggs each week.

3.     Know someone with a garden? Ask if you can have their extra fruit and vegetables in exchange for helping pick them. Then sell the fruit and vegetables at the local farmers market each week.

4.     Buy small inexpensive fish, grow them into larger healthy fish and sell them to local businesses with fish aquariums in their store.

5.     Have a knack for coming up with funny sayings or slogans? Approach local schools, community organizations, or companies and ask if you can design and order the shirts for their next event.

6.     Love reading books? Ask the local bookstore owner if you can review books on his website for a small fee. Develop the best teen book review forum in town or heck, in the country.

7.     Great at computer graphic designs with a great imagination? Contact me. I need someone to help illustrate my blog, books and website!

8.     Love creating videos and posting them on the internet? Contact local business owners in town and offer to make videos about their business every week so they can have their own YouTube channel tied to their website. Tell them how this will help others find their business on the internet. Many kids know more about technology than most adults. Leverage that knowledge and your passion to make money.

9.     Have a lot of computer savvy with friends that are looking to make money too? Create a forum where your friends can post their products and services for sale. KEEP IT SAFE!  If the service being sold requires the kids to be present at the customer’s house or business, only sell to people they know and never go alone or without an adult.

10.  Create a local teen review forum and have all your buddies review restaurants, clothing stores, arcades, local hang outs and other businesses in town then approach businesses in town to advertise on your forum.

11.  Great at recognizing fashion and dressing? Become a personal shopper for friends and classmates.

12.  Love taking great pictures? Post them on istockphoto.com or similar sites for others to buy. This also works for illustrations and graphic designs.

If you came to this page it is probably safe to say, you are looking for ways to make money or you are a parent looking for ideas for your child. I love your initiative, passion and effort put forth just to locate this page. You came for the list so I gave it to you, but I want you to look past your desire or need to make money and challenge you to understand what money is and how it works.  I want you to stop chasing after money and let money chase after you! There are opportunities all around you to make money but if you do not educate yourself you will not recognize the opportunity much less act on it.

The most important thing to understand is that getting rich is NOT about how much money you make, but how you SPEND the money you have.   For example, if you get a job and make $20/day and each week you go to the store to buy a game or toy for $100 YOU WILL ALWAYS BE BROKE!

It will be up to you to be disciplined because your friends, family and society will innocently tell you to spend the money on things that make you happy. You have worked hard for it and owe it to yourself. Once you adopt this philosophy you are destine to spend your life working for money and living in the rat race just like the friends, family and society that taught you that.

So what should you spend your money on? Assets. Assets put money IN your pocket, even when you are not there. For example, let’s say you get $10 for your birthday. Even though you just got a load of toys you will still have an all-consuming desire to go buy another toy. You go to the store and buy your favorite action figure. You have your toy, but your $10 is gone forever. What if, instead you fought your all-consuming desire to buy a toy and instead ask your grandpa if you can buy 2 or 3 of his chickens and keep them in his chicken coup? Each week you sell the eggs to friends and family. Let’s say you get a dozen eggs each week from your 3 chickens and sell your homegrown organic eggs for $2/dozen. Sure it will take $5 weeks to get your $10 back. The good news is, in 5 weeks you will still want a toy! The even better news is in 5 more weeks you will have another $10 to buy another toy! You can take $10 and easily turn it into $100. That is the true opportunity! That is how money works for you!
I will continually add ideas for kids to make money as I think of them so check back in periodically.  And when you go out and make money, let us know what you did by sharing your story here.  We would love to hear from you!

Monday, March 19, 2012

The Gift of Disney

Having young children, we are in a season of life where we are invited to many birthday parties. Kid parties are much more complicated than they use to be. What happened to the days of having your best buddies over to the house and playing for a few hours? Now days it involves renting a venue that can keep the kids entertained for a few hours, providing food and paying for the entertainment, and supplying gifts to all the attendees.

This is the perfect recipe for large birthday parties. What kid wouldn't want to play games at Chuckie Cheese, brave the foam pit trapies, or defend their lazer tag title? On top of that the birthday boy goes home with more toys than he or the parents know what to do with!

Our challenge and opportunity should be to find a meaningful gift. Disney is an amazing company that has made millions of movies and toys for kids for many generations. They have made one gift that never goes out of style, provides an opportunity to teach kids financial concepts they are otherwise not exposed to, and can provide ongoing income. I am not talking about Mater, a Disney Princess, a movie or some other toy that will be broken, duplicated or soon forgotten about.

The best gift Disney ever made is Disney stock. Next time your shopping for a birthday gift, think past toys, dolls, and remote control cars. Leave those gifts up to the others and think about giving a gift that amidittedly may be underappreciated at the time but can set a child on the right path of achieving financial freedom.  

Sunday, March 11, 2012

Is that an Asset?

Which of the following is an asset?
a.       Lemonade Stand
b.      Gumball Machine
c.       Your House
One of my favorite definitions of asset is it puts money in your pocket even when you’re not there.  It is easy to remember and easy to apply.  Let’s walk through each of the options listed above.  Let’s start with your house.  Many American’s consider their home their greatest asset, but according to our definition, your house is not an asset.  As a matter of fact, it is a liability.  Every month it takes money out of your pocket.  Even if debt free, you still have maintenance, utilities, and insurance to pay for.  While your lemonade stand can make you money, it only makes you money if you are present working it and selling lemonade.  Your lemonade stand is a job, not an asset.  The gumball machine puts money in your pocket whether you are there or not.  It is the only asset of the three.
So how do you turn your home and lemonade stand into an asset?  Rather than running your lemonade stand yourself, you set up several around town and hire employees to run them for you.  This converts the job into a business.  The house can be a little trickier, but personally we have made an attempt at it. We rent out our barn apartment and some of our horse stalls to bring in monthly income.  While it doesn’t cover all the expenses related to the house it does reduce the impact of the liability.
Brainstorm with your child how she can turn things around her into assets.  To get the creative juices following, here are some things we have brainstormed in our house to help our son build his assets:
1.     He used his earning from last year’s lemonade stand on National Lemonade Day to purchase a gumball machine, which he then placed in a local business.
2.    We wrote and self-published an eBook on Amazon.com to teach children the concept of income.  You can check it out here A Day At The Carnival
3.    He has taken proceeds from his vending machine business to buy baby goldfish and grow them in our horse troughs to about 6 inches long and then sells them to others to put them in their water trough to eat the mosquito larvae and keep algae down.      
Do you have examples you can share?  I would love to hear them! 

Sunday, March 4, 2012

Welcome to Financially Savvy Kids

Welcome to Financially Savvy Kids.  Our goal is to equip parents and kids with knowledge about how money works.  Public education does not teach our children what they need to know about money.  Society teaches them to buy what they want through debt and then work hard to pay for it. This vicious cycle typically starts before they are out of college and unfortunately, once in this cycle it can be very difficult to climb your way out, much less get ahead.  Breaking the cycle, once in it, takes great discipline.  Again, a concept counter intuitive to society’s teachings.    We want to educate kids about money BEFORE they fall into the trap.

For instance, you were probably raised with the idea that you should work hard to get good grades, go to college and get a high paying job. I would venture to say most of us want that for our kids today.  This path jump starts the cycle mentioned above and puts our kids at a great DISADVANTAGE. 
1.  As a reward for all their hard work and for securing that high paying job, they will buy a house, get a new car, and acquire a new wardrobe that will make them look and feel like a million bucks.  They are feeling pretty good about their money management skills because they have two new “assets” in their house and car, and they even throw a little money into the company 401K.   In a matter of a couple of months their entire paycheck is allocated to expenses, many of which they wrongly believe are assets, to support their new found and richly deserved lifestyle.  And so the cycle begins.  The ground work is laid for a lifelong pattern of dependency. 
2. They are thrown into the highest tax bracket and once the impact of that is realized, they begin spending money on things they think are assets to reduce their tax bill, such as golf clubs, boats, R.V.s and a second home.
3. All creativity and any entrepreneurial spirit is squelched by the realization that without the pay check they have grown accustomed to, they will  drown in their own expenses, and they are lured into believing working for a paycheck equals security. 
I am getting cold sweats writing this, because it is the exact path that I took.  About 7 years into my professional career and shortly after I had my son, I decided to take on the daunting task of breaking the cycle and replacing w-2 income with investment income.  It has been a long, slow and at times scary process.  I am not seeking a path of lavish luxury and wild riches.  What I am after is even better...financial freedom.  The ability to spend my time with my family, doing the work that I want to do, having the financial capacity to give to my church far and above my ten percent tithe, and to give my son a different example than what he sees among  most of society.  I want to teach him how to make money work for him rather than being a lifelong slave to money!
Through this blog we will share fun and easy ways to teach our kids about making money, spending money, creating wealth and giving back.  We hope to create a forum where you will share what you are doing to teach your kids about money for the benefit of our readers and together we can pull out the entrepreneurial genius in our children!