Teaching Entrepreneurship and Investing: Eight Ideas For Parents Who Want To Instill Good Personal Finance Values

Over Mother’s Day weekend, my wife and son and I drove several hours to pay a surprise visit on my mother. We spent most of the ride talking about our newfound financial success and wondering what sorts of activities we could involve our child in in order to give him the spirit of entrepreneurship and of being an investor and not a spender. After tossing barrels full of ideas around (and me scribbling notes in my trusty idea notebook), we came up with eight concepts that we plan on involving our own child in to teach him the right kind of personal finance lessons for a lifetime of success.

The Four Jars Whenever my son gets money for any reason, we’ll split it up into four equal pieces that we’ll physically represent with jars: money to spend, money to save (for larger purchases), money to invest (for the future), and money to give to charity. This goes for birthday money from relatives and any money earned any other way.

Extra Chores For Extra Money We’ve largely decided to forego the basic idea of an allowance, as many basic chores should be expected (clean room, assistance with basic home maintenance). However, larger chores that require some significant effort can earn some extra money. I like to use the example that my father used to use for me – for every pound of weeds I pulled out of the garden, he’d give me something. Extrapolating this, we could have a vegetable garden and I would offer to “buy” a certain amount of pulled weeds from him.

His Own Investment Account My wife and I both feel strongly that he should be involved in investing decisions using the money in his “invest” jar as young as reasonably possible. This takes the form of a custodial account that I’m nominally in charge of, but one that he would basically control.

Lemonade Stand For the basic expenses for this, he would take money from the investment jar to buy supplies, then sell the lemonade. This is a good way to keep him busy but involved during a yard sale. After the sale is over, he takes the money, repays the investment, then splits the money among the four jars.

Parade Seller During local parades, there’s usually a few boys around the age of ten walking up and down the side of the parade route, hauling a wagon full of cold beverages on ice to be sold for a dollar each or so. Similar to the lemonade stand, my son would buy the expenses up front out of the investment jar, then repay the investment after the parade and split the remainder four ways. Doing this once upon a time netted me $50 profit in about two hours, incredible money for a ten year old.

Door-To-Door Servicing Entrepreneurial-minded youths in my hometown often went door to door during the summer offering to mow lawns for a small amount and also did the same during the winter, offering to scoop sidewalks on snow days. I lived too far in the country to capitalize on this, but my wife certainly did, especially on the snow shoveling side of things. I think I would permit him to borrow the family snow shovel for this purpose.

Can Collecting This was a business that I learned a lot from as a child. With nickel-a-can recycling in Iowa, it’s pretty easy to set up a can collecting route in the neighborhood. Just provide a receptacle for anyone willing to toss their cans, then go around once a week and empty out that receptacle (and possibly clean it). You can often collect several dollars worth of cans in a half an hour doing this.

Open Money Discussions My wife and I both feel an open book policy is a good idea, with monthly meetings that lay everything (or almost everything) on the table. Outside of a small discretionary amount, if I can’t justify it to my child, why am I doing it? It gives us a chance to be good financial examples and it also gives my son the chance to report on his financial moves as well.

After all of these, though, the best gift we can give him throughout his walk of life is love and emotional support.

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  1. Jeff Davis says:

    I love the ideas you presented here. It shouldn’t be hard to get your child interested in entrepreneurship. Once the rewards present themselves, I’d imagine that in the lil tyke’s mind, the ball keeps rolling from there.

    I did have one suggestion in regards to how much your child charges for services such as lawn mowing and snow shoveling. For my own child, I would tell him to tell the customer to pay however much he felt the work was worth when the job was done. If the amount the customer pays is less than a certain amount, I would subsidize the effort later – to bring the pay to the minimum I felt it was worth.

    I have a feeling many people would pay more than what a child would think he could get.

  2. Ursula says:

    Trent, I **love** this list! I wish my parents had did for me what you are going to do for your children! Your list was inspiring, and makes me wish I had a kid that I could apply these principles to! :-)

  3. Matt says:

    While I admire the thought and care you’ve put into this, I think you’re going overboard. The most important lessons about money are those we learn by watching the example of our parents. You can’t make your kid into an entrepreneur any more than you can make him into a top student or athlete – he has to want it.

    Children don’t need to see the details of your finances. They just need to learn that money is earned through work and should be spent wisely. They don’t need to see bank statements and ledger sheets to learn that lesson.

    Lastly, do you give 25% of your income to charity? Is it fair to essentially force a child to do so? Will he learn the value of giving that way or will he resent it

  4. Trent says:

    Matt: we would give 25% (or more) of our income to charity if we didn’t have housing and utility costs. Right now, we give in excess of 10%.

  5. rhbee says:

    We plan and the gods laugh. I’d like to hear what happens when he’d rather play with friends than (oh joy)pull weeds or sell lemonade. What happens if he does what most children seem to do, the opposite of whatever you “choose”? It might seem like a small thing but maybe you should just include him in without all the listing of things that make life seem so preordained.

  6. Steve says:

    One of the things I am thankful for is having found my way to your blog a couple of weeks ago. It’s always fun, informative/educational, inspirational,…
    What will the kid do with the charity jar? Take it to church on Sunday or give it to the poor or…? How do you plan to impart the idea that giving away some of your earnings is beneficial? (Sorry, it seems a couple of us are against making the child give away so much. I am not really against it. Just probing. Probably you will figure things out along the way.)
    You are lucky to have a wife that you can openly discuss your financial matters with… Hopefully, your son will be as lucky. (Related to my original question, do you think you will be able to teach your child to find a girl who is financially “responsible”? I am not sure I am that lucky yet! Life is a little complicated. I think you said it best: love and emotional support is the best gift you can give to your kid.

  7. woody says:

    I think it’s a good idea to get your child involved in all this early on, but I want to caution you that children do grow up! :) At some point your kid won’t want to follow your advice, or may go compleatly against it. Get your advice in while you can, in between the rebelions. It comes in waves, usually around 2, 8, and 14ish for boys. :)

    If he decides he wants to change the system, give him advice, but don’t stop him. While it’s good to set an example, and give your child constructive advice for later in life, it’s equally important to let him make (and learn from) his own mistakes. The more mistakes he makes as a kid the better, since he’ll still have you as a safety net. (Preferably a non-judgmental safety net, that only says “I told you so” a week or two after the crash and recovery. ;)

  8. FS says:

    When I was younger, my parents were always so frugal and insisted that saving for the future was the best thing to do with money, and I didn’t know why. I actually resented them for it because that meant I couldn’t be spoiled, but now I realize why they did what they did, and I actually thank them for it. It taught me to save at a young age and appreciate hard work and little rewards. I hope you don’t push your son too hard to the point that he’ll resent you, but it’s nice to know he’ll have someone like you as a safety net.

  9. Could you go into more depth on the specifics of a custodial account? I’ve set one up at Sharebuilder for a bestfriend’s first-born, but the monthly commission ($4/purchase) eats much of the small contribution. After all, I’m going for 20 years of dollar cost averaging and want to make many, small contributions. Seems like this is pretty tough to do in reality and make it economical. Even mutual funds which don’t charge a commission have a pretty large minimum contribution. What are your plans?

  10. Schwamie says:

    I think that your posts list a lot of great ideas for helping parents provide choices to their children if the child wants to have more “spending/saving” money. Please continue to post these as I want my children to have a good idea of what money is and how it works (as a means of exchange). I would be interested to find out if you are able to have a child set up a LLC in their name for these “small business ventures” as this would then allow them to put their contributions into a Roth IRA versus just a savings account. Why should the child have to wait until they are a late teenager to start saving for their retirement!

  11. Rebecca says:

    In regards to charity, I was raised with various charity boxes in the house, and expected to contribute. With my children, they have the options of the family boxes (one of which lives on the dryer for found money) or their own. With their own box, they get to choose what type of charity, and I would choose the specific charity (so that we stuck with reputable ones) Over the years, my son has chosen to contribute to various natural disasters, a local no-kill animal shelter, and the local family shelter as well as a number of religious organizations. We also give tandem gifts for most occassions- a traditional gift and a donation to a charity the recipient supports in their name.

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