Raising Entrepreneurs

They are everywhere!

It seems that everywhere I go, I am finding great stories about young entrepreneurs and the many ways for kids to make money. Kids earn money by finding lost golf balls, uploading photos for technically-challenged older folk, breeding pet rats, and, of course, the old classics are evergreen - babysitting, lawnmowing, car washing, and household chores.

Just the other day I came across a comment on the Connect With Kids blog, which really warmed my heart. Krisi Repp, who has obviously done a great job of parenting her three youngsters, talked about her son.

Our 11 yr old is a boy and this is his 2nd summer to own his own lawn care biz. Last summer he made about $700.00 while the majority of his friends played video games, etc. He bought a cheap rider, pusher, blower & trimmer to get started w some left over Christmas money & money from his dirt bike he sold. This summer, w his approx $500. left in the bank, he decided to purchase a brand new rider on clearance. His Dad & I financed it for him w the understanding that he would be expected to pay it off in full before the end of this summer. 2 weeks ago, he brought $1,200.00 CASH to make his 1st pymt, leaving less than a $150.00 balance. I know he feels very proud of himself & rightfully so! He has vision of purchasing a nice car when he turns 16 & I’m sure he will be able to.

I love hearing these stories, because we are talking about ordinary kids, living in ordinary neighbourhoods, with no lucky talent or physical prowess to set them apart from other kids. These kids achieve their results through good old-fashioned hard work and enterprise.

How many lawns do you think this youngster mowed to raise $1,200?

But what a sense of satisfaction!

I remember when our girls made the final payment to repay the start-up capital for their business - the sense of achievement was incredible. I think they were happier that day than when they actually started withdrawing the profits and spending them.

We don’t help our kids when we give them everything they want - we deprive them of the satisfaction of earning it for themselves, and the confidence that comes with knowing they can negotiate with the world on their own terms.

In fact, by depriving them of the learning experiences that come with taking real responsibility, we actually cripple them for dealing with the harsh, unyielding reality that is “the real world”.

Krisi’s son has been living in the real world for years already - it will hold no terrors for him later in life.

Are your kids so well prepared for adult life?

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I was surfing about the net, as you do, and I came across this blog post Teach Our Children Well by Gail Vaz-Oxlade.

Gail talks about the generally poor level of financial education in schools (well, we’re all worried about that), but she gives some really great examples of individual class teachers who are doing some good work in teaching kids about money.

Maybe if we explained the reality of money to kids early enough, we’d have fewer kids dropping out of school. I mean, if you knew that if you settled for making $10 a hour you would have to work 70, 80 or 90 hours a week just to keep a roof over your family’s head and food on the table, maybe then you’d be less willing to blow school off.

My son’s Grade 6 class is learning about money. Ms. Moran has set up a town, Fletchville, in which the kids in her class live. They drew jobs from a jar and have to figure out how to live on their assigned incomes. They started by finding a place to live for the amount they could afford. Malcolm and his friends, Logan and Liam, combed through local papers and the internet to find a place within the geographical parameters set. I heard lots of talk of making sure the rent included utilities because “they can cost a lot of money.”

The project then turned to figuring out a meal plan - based on the food guide - and creating a priced-out shopping list so they would know what their food budget was. Wow! How many of you have done that?

And last week, they had to buy themselves cars. So they had to figure out what they could afford and go shopping for a car that fit their budget.

Doesn’t that sound like a fantastic exercise for 11 and 12 year olds?

Don’t wait for the lottery win that will put your child in a classroom with a teacher like this one - start now, running exercises like this with your own kids. If they have a blog, they can blog their research and results.

I find my kids work better on these things if outside kids are involved - fortunately,my girls have a cousin of a similar age, and her parents are THRILLED that she finds mathematical exercises so entertaining over at our place!

I know you’re busy, I know it’s hard to overcome the moaning and whining when they would rather be on the computer or the phone, I know sometimes it’s easier to put these things off, but hey, we all know it’s important, right? Just make it happen - you’ll be glad you did.

I highly recommend checking out the rest of Gail’s blog, too, because she tells it like it is!

A Suffolk sixth former has received national recognition for his entrepreneurial skills after starting Britain’s largest diabetic gift service.

Giles Peters, 17, was inspired to set up Diabetic Hampers after trying to put together a hamper for his diabetic uncle. He found that there was very little choice for diabetics and decided there was a gap in the market.

Giles raised his start-up capital by selling clothes and books on eBay. He sourced products from a number of small companies, checked them with dieticians for suitability, and launched the company in the summer of 2007.

Now 18, and studying for A levels at Framlingham College, Giles was recently presented with a National Enterprise Award at a prestigious ceremony at the Hyatt Regency Hotel in London attended by the prime minister Gordon Brown, enterprise minister John Hutton and chancellor Alistair Darling.

Speaking at the presentations, Mr Darling said: “At a time when the world is undergoing extremely rapid economic change, with massive growth taking place in China and India, we must remember in this country we have a tremendous reservoir of talent and ability. When we have success, we need to shout about it an awful lot more.”

One of my daughters started with a new business idea a couple of weeks ago.

With everyone raving about the social networking platforms like Squidoo and HubPages, I figured there was probably a place in the market for someone who knows how to put together Hubs and/or Squidoo lenses. There’s a lot to get your head around, and if you’re not really technically-minded, it can be quite frustrating and time-consuming.

I showed the HubPages site to all three girls, and one of them just fell in love with the desktop-publishing style layout features.

So she’s launched herself as a Hubber-for hire, and already has three orders to make Hubs for businesses.

Kids are so comfortable with the internet and all these new technologies, and so many business owners are fairly clueless, so I can see this little business being a nice earner for a while!

Proud Momma, signing out …

I was interviewed recently by a journalist, when Cash-Smart Kids was voted “Web Site Most Likely To Change The World”. She said she was a little embarrassed to admit that she wasn’t quite clear on the meaning of the term “passive income”, and we agreed she probably wasn’t alone.

How can parents explain these ideas to their kids if nobody has ever explained them to the parents in the first place?

This post is the first in a series providing definitions of key money concepts, and suggestions for simply ways to explain the concepts to your kids.

We distinguish two types of income - active income, and passive income. The Australian Taxation Office refers to them as “personal exertion income” and “unearned income”, which I think is a bit rough. Most people I know who have passive income worked very hard to build it up, thank you very much! They have certainly “earned” it.

The difference is that with active income, you are trading your time for money, while passive income will keep coming, whether you get out of bed in the morning or not.

The most obvious form of active income is having a job. You put in a certain number of hours, and you get a certain amount of dollars in exchange.

There are other forms of active income - if you make things and sell them, that is still active income, because you have to put time into the making and the selling.

If you organise other people to do the making and the selling, and you get a percentage of the profits because the people are using your design, then you don’t have to put time into it any more. It has become passive income.

This is a form of passive income called royalty income, or licensing income.

Other forms of passive income are interest, rent, and dividends. These forms of income require you to have an asset (cash generates interest, real estate generates rent, and shares generate dividends).

Your kids can grasp this concept fairly readily. We played Robert Kiyosaki’s Cashflow 101 with our kids - it is a game specifically designed to get the idea of passive income across to the players. By the time they were ten, they all understood it.

You can give your kids a powerful visual demonstration of the power of compound interest by playing a game with them. Ask them to save their allowance money, and not spend it. Each day, check their balance, and give them a payment of interest. Each day, the payment will be higher (in the best of all possible worlds, one of your kids will break ranks and spend some of their allowance, while the others hold firm, to give a direct contrast). Make the interest payment big, 50%, or even doubling their money, so they can see the power of compounding in just a few days.

After a week, show them that they can spend the interest each day, and leave the original investment in place to earn them more interest the next day.

Most kids grasp it pretty well - just be prepared for the inevitable question, if you are still heading off to a job every day.

“Why don’t you do that, then, Mummy? Then you could stay home all day and play with us!”