Each Friday, The Simple Dollar reviews a personal finance book of interest.
Writing about kids and money is a fairly sticky topic. I’ve read several books on the topic and only bothered to review a few on here. The best one I had read so far, David Owen’s First National Bank of Dad, was really entertaining and offered some thought-provoking material, but in David’s own anecdotes, he didn’t practice what he preached, leaving me wondering what the point was.
For the most part, those books quibbled over issues like whether or not to give your child an allowance, how to convince your child to save, and how to introduce various money topics, such as credit cards. Troy Dunn, the author of Young Bucks, takes a different tactic. His focus is entrepreneurship for kids – how can you show your kids how to work for their own money in a fairly safe environment and also see the clear rewards of their effort?
Dunn is a self-made millionaire and the father of seven children, so he has extensive experience in both the entrepreneurship and parenting arenas. Do these combine to make a thought-provoking book of parenting advice about personal finance, or does it fall flat like many others?
One – Millionaire Mentality
Dunn argues right off the bat that there are three harmful myths that parents tend to share with their children that subtly guide them away from entrepreneurship and successful money management. First, a college education is the key to business success, which is something I’ve become less and less convinced of myself as of late. Second, a job with a good corporation will secure your child’s financial future. I don’t agree with that one, either – all it takes is a memory of Enron to show how fleeting even the biggest corporations can be. Third, children shouldn’t have to worry about money when they’re young, as there’s plenty of time to focus on finances when they’re adults. I think there’s a general sense that this third one is a myth, at least among people who think about their finances carefully. So many of us who are in debt trouble today came into that situation because of a lack of experience with money in our childhood.
Two – Mentor Magic
Dunn argues that you should be a business mentor to your children, encouraging them to think creatively about the things that they can accomplish with their time, their work effort, and their ingenuity. Have you ever told your kids to enjoy their childhood because when they grow up, they’ll have to work? That paints an extremely negative view of work, one that’s going to rub off on your kids. Instead of thinking of it as a fun challenge that they throw their passion into, they instead dread it. Change that by encouraging their creativity, offering only suggestions to channel it a bit, not stifle it. Even more importantly, Dunn encourages no allowances at all and no splurging, either. While that seems really harsh to some, his point is that an allowance encourages your children not to work and plan for what they want. Instead, you should encourage them to be little entrepreneurs, earning that money.
Three – The Millionaire March
What are your child’s natural talents and traits? What adjectives do you use when you think about your kid? Almost all of those, from stubborn to outgoing, are elements that point a child towards something productive they could be doing with their time. Dunn suggests simply taking those traits and coming up with an idea for a small business that the child could run. What fits their natural tendencies? The key, though, isn’t to push your great idea for them on them, but hold onto it and slowly push them towards developing it themselves.
Four – Business Building Blocks
So you have this great idea for how your kids could make money for themselves, but have you thought through it clearly? Dunn spends this chapter outlining some of the key things you should be thinking about well in advance of your kids so you’re prepared for it, from safety and seed money to legal requirements and logistics. Dunn also suggests starting as young as possible, assigning your youngest children (five and under) simple tasks and paying them immediately for them. We’ve already started doing this a bit with our two year old, believe it or not – he earned fifty cents for picking green beans the other day (seriously, yes, a two year old picked enough green beans for a family supper and earned fifty cents for his work). When they’re between the ages of six and ten, you should start them on very simple businesses – like, for example, collecting aluminum cans in the neighborhood. He suggests trying things at this age because they’re still happy for attention and deeply enjoy spending time with you. After that, it gets trickier – you’ll have to convince pre-teens that things are possible.
Five – The First Meeting
So, how do you get started? Dunn suggests waiting until there’s something that they want that they can’t afford, giving them incentive. Then, suggest the idea of starting their own little business with questions, not by offering commands that seem like more work. “Why don’t you try earning the money?” Allow them to be creative, then just guide that creativity with some more questions, and eventually transition that into coming up with a business plan with them. Just let them lead – ask questions that makes them think about all of the things you’ve already considered. That way, when the idea comes to fruition, they’ll feel as though they built it.
Six – Business Begins
Once the ball is rolling, you’ll have to guide your child through many of the logical steps of a basic business. What exactly are you going to provide? What is a sensible price? How will you market it? What are the startup costs, and how will those be handled and repaid? As a parent, you should consider these things and offer your child good suggestions that will help them out. Show them the prices of comparable items. Show them how other businesses advertise – what makes an effective poster? Let them decide, but be there to help them along and help them avoid any obvious pitfalls.
Seven, Eight, and Nine – Big-Buck Businesses
Here, three chapters are devoted to ideas for microbusinesses for your children to take up. In all, twenty eight businesses are suggested over the three chapters, with a detailed description, the startup costs, needed materials, potential income, and suggested marketing strategy for each one. While reading these, many others came to mind – this is really just a starting point to get your (and your child’s) creative juices going.
Ten – Business Pitfalls
Obviously, such a business is not going to be all roses and cherries. One big problem that children face at the lemonade stand is people who play hardball – they “power negotiate” or they simply don’t pay up for the service provided by the child. Don’t let your child get disillusioned – talk to them about it seriously. Help them to develop a healthy sense of skepticism (but not paranoia or mistrust). Eventually, they’ll be able to apply that skepticism successfully in other aspects of life.
Eleven – Sweet Returns on Passive Revenue
Your child is earning money and building up a nice little amount. What should they do with it? At first, obviously, they’ll probably purchase the item they’ve been talking about, but after that, it’s a good idea to encourage them to do something wise with it. Perhaps they can hire an assistant, paying that assistant some portion of the proceeds to help with the business. They might also want to reinvest it, buying a better lawn mower or more supplies. They may also want to invest it in something more than just a savings account. Again, talk with your child about these decisions and make sure they choose one that makes sense.
Some Thoughts on Young Bucks
I think you have to be entrepreneurially minded to encourage your kids to be entrepreneurially minded. Most of this advice works best if you’re an entrepreneur (or at least self-employed) with kids, because most of the thought process here will already be natural to you.
The “no allowance” thing is interesting. I think the idea is strong, though, as long as the child has the opportunity to earn direct rewards for extra work. Dunn points towards this with young children in the fourth chapter.
I think this is much more like the direction that I’d like to encourage my children to go than some other books I’ve read. I’d like my children to see the basics of personal finance management as young as possible, see the connection between work and money, and see the value of saving and budgeting as early as they can and repeat it for as long as possible.
Is Young Bucks Worth Reading?
If you have kids, I think Young Bucks is well worth reading. The idea of encouraging your children to follow an entrepreneurial path is worth serious consideration. I know in my family it’s one that we’re pondering over as we watch our young ones slowly progress from being babies to being toddlers, then on to being young children. How will we teach them how to spend and use money wisely?
Given that, I don’t think Dunn’s overarching ideas about child entrepreneurship are necessarily something every parent will agree with. Young Bucks is, in some ways, a perspective book – it’s a how-to for encouraging your child to be an entrepreneur. But do you want your child to be an entrepreneur? That’s a question you really have to answer for yourself, and this book just provides one side to that argument.
From my perspective, though, Young Bucks was a very enjoyable and thought provoking book to read. It goes up right next to First National Bank of Dad as the best reading I’ve come across for thoughts and interesting reading on how to financially educate your children, and it tackles the topic in a much different fashion. Well worth reading if you’re a parent of young children.