Children are Natural Entrepreneurs. Invest in their Ideas.
The following is adapted from Smart, Not Spoiled by Chad Willardson.
Kids love making things, money included. Sometimes all your kids need is a little guidance and literal buy-in from a grown-up investor like you.
Early ventures — from odd jobs to lemonade stands — teach how to negotiate, start businesses, and feel confident in future careers. Once kids learn to earn, they may surprise you with their creativity.
Provide Seed Money and Moral Support
One summer, my three older kids hatched an idea to make some money: selling glow sticks at a July 4 event. Their idea would cost up-front money for inventory, so they approached the Bank of Dad. After listening to their pitch, I decided it would be a good learning opportunity. At their request, I bought $100 worth of red, white, and blue glow stick bracelets and necklaces.
To provide incentive to actually make sales, I explained the risks and responsibilities. No matter what, they’d have to pay me back for my investment. If they went to the festival and got swept up only playing Frisbee, dancing to the band, and hanging out with friends, they probably wouldn’t break even. It was going to take a little work.
We arrived at the park before sunset. I advised them that dusk meant “game time,” because people would be inclined to buy after dark when the sticks were glowing. At first, they felt reluctant. What if nobody wanted to buy them? That would be embarrassing. Plus, their friends were distracting them from their business opportunity.
I huddled them up to explain that, while they owed me $100, I thought they could easily make plenty of profits if they put themselves out there and had fun. They could approach families and say, “Look at these cool glow-in-the-dark bracelets and necklaces — don’t you guys want some?” I encouraged them to follow through on their plan and just see what happened. If they weren’t having success after fifteen minutes or so, we could regroup.
Let Their Goals Lead
When the fireworks started nearly forty-five minutes later, they were still out among thousands of people in the park, mingling and selling. My wife started to worry, but I assured her they were just immersed in their business. When they rejoined us, they were so excited! It turned out they didn’t have to worry about approaching people, as families from every direction waved them over to their blankets to buy five or six items at a time.
At home, we counted up the money. They paid me the $100 for the inventory, plus $5 of interest, and found they’d made $260 of profit in less than forty-five minutes of work! Plus, they enjoyed the experience far more than mowing lawns or raking leaves.
My then 8-year-old son mentioned how fun it was to see people excited to put on their new glow-in-the-dark necklace or bracelet. This offered our kids a great learning experience, and it didn’t take away their enjoyment of the holiday — they had a blast.
The July 4 sales experiment worked because it stemmed from their goals, not a lesson I forced on them. There were items they wanted to buy and activities they wanted to do during the summer. I had agreed to pay for some of those costs, but not all, so they needed to figure out a way to make more money.
Limit Free Money
Truthfully, sometimes I take heat from my wife for insisting our kids do extra work or learn money lessons instead of always handing over freebies. As this example shows, when you instead invest in your kids’ ideas through both loans and guidance, they come away with an experience they can learn from. Their motivation to get what they want drives them to get creative and put in the work.
Our approach of paying for some but not all of their wants and wishes goes back to my overarching philosophy of helping kids become smart, not spoiled, and the successful July 4 business shows the power of that philosophy.
For more advice on raising enterprising, creative kids, you can find Smart, Not Spoiled on Amazon.
Chad Willardson, CFF, CRPC®, AWMA®, is the President of Pacific Capital, a fiduciary wealth advisory firm he founded in 2011 that serves entrepreneurs and families. His bestselling first book, Stress-Free Money, has been featured in Forbes’s “21 Books To Read In 2021” and on NBC News and Yahoo Finance. Chad has appeared in the Wall Street Journal, Inc., U.S. News & World Report, Investment News, Entrepreneur, and Financial Advisor Magazine. He lives in Southern California with his wife, Amber, and their five children.
