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!