Financial Literacy and Raising the Entrepreneurs of Tomorrow
Across the US there is an emerging trend of entrepreneurship. Over the last 20 years, we’ve seen growing numbers of young entrepreneurs build successful businesses, many before the age of 18. Organizations from all over have arisen to help these young entrepreneurs get their start, both for funding and helping them to develop the right mindset. Technology has made a new generation of kid-preneurs possible. In a survey of the top 20 reasons why startups fail, a staggering 29% cited just plain running out of money for their downfall. Having an understanding of what creates failure, and learning those lessons early on (when there is less at stake) can dramatically shorten the learning curve for a young entrepreneur in business. There are many things you can do when raising the entrepreneurs of tomorrow.
How Can You Help Your Child-preneur?
Only 17 states in the US require high schools to teach finance to their students. Research done by the Financial Educators Council found that children aged 10-14 scored an average of 54% in financial literacy. This test was originally designed for 15-18 year olds, who only scored 6% higher than their primary school fellows.
Financial management can be a tricky conversation for parents to have with their kids. It can be one of the most challenging aspects of raising the entrepreneurs of tomorrow. This is because they may feel unconfident about their own financial choices. Luckily, whether you’ve made rockstar financial decisions or not, you have two very important things to offer your children when it comes to their financial education: experience, and perspective.
Experience for Raising the Entrepreneurs of Tomorrow
Experience isn’t something you can teach, but you can train it over time by beginning to teach your child about money from an early age. Lead by example. Even if you aren’t the perfect example, research shows that we learn most effectively when we learn by doing.
The more active your children’s learning experience, the more likely it is that their knowledge will permanently sink in. If you teach your child from day one the importance of good money management, those skills will naturally develop over time.
Perspective: Wants vs. Needs
As an entrepreneur, one of the first things you learn is the difference between wants and needs in your business. You may want fancy equipment, but when your financial runway is only a few months out, you quickly learn to cut the unnecessary. This same skill is important to teach your mini entrepreneur.
Just like an entrepreneur needs to balance the books across multiple accounts, you can encourage kids to save by using jars for different objectives. Using a jar allows them to tangibly see money as it grows. Just giving them money doesn’t teach the importance of saving.
Imagine they want a Coco guitar, which costs $34.95, but they only earn $5 per week in allowance. They can choose to spend their money as they receive it on candy or various other things. Or they can watch as it physically builds up $5 at a time until they are able to afford that guitar in week 7. Granted, they don’t need the guitar. However, it’s a great lesson in delaying short-term gratification by saving for something important. And, it’s a success factor in raising the entrepreneurs of tomorrow.
Financial Freedom and the Lemonade Stand
Once your child understands the basics, it’s time to put what they have learned into action. And it involves a lot of lemons. The time honored tradition of a lemonade stand ignores some basic aspects of a business; like rent, or cost of goods. However it does teach important skills like commitment, teamwork, adaptability, and critical thinking.
Whether for financial independence or fun, your children are committing to build something with their own hands. If they are building this empire with a sibling or friend, they will learn valuable lessons in teamwork and profit-sharing that they will look back to years down the road with future co-founders and investors.
If your children aren’t profiting at one corner, they will learn to move to another corner. Perhaps they might pivot to offer instead organic locally sourced lemonade. By discovering the best corner for business or a preference for local lemons, your child is already well on their way to becoming an entrepreneur.
Lessons From Raising the Entrepreneurs of Tomorrow
Learning the fundamentals of finance are important throughout childhood. By the time these kid-preneurs become adults, they will be better prepared to maneuver through the twists and turns of entrepreneurship. The principles of finance are vital in life. With critical thinking skills and financial stability learned early-on, your child will be better equipped for success in any business they pursue when they grow up.