Some kids just want to be grown up and have a knack for making money. Entrepreneurship for kids is a hot topic – how can a parent help channel that energy in the right direction?
What’s on the mind of your average 15-year-old?
Most likely it’s a combination of prom dates, SATs and driver’s education classes. Well, that’s not the case for Maddie Bradshaw (watch her on Shark Tank). At the age of 15, Maddie pitched her first business idea on Shark Tank, convincing Mark Cuban, Robert Herjavec, and Lori Greiner to invest $300k for 30 percent of her company, M3 Design. Three years later, Maddie enrolled at Stanford University. Today, she made Inc.’s list of the “Top 40 young people to become millionaires by the age of 20.” Maddie Bradshaw is a prime example of why it is never too early to teach your children basic entrepreneurship skills.
Children see the world from a different perspective than adults. They see niches that adults miss, they become enamored in play, and they’re not afraid to let curiosity guide their creative explorations. As a parent, you have the unique ability to teach your children the lessons and skills they need to become successful entrepreneurs. These skills include the art of observation, marketing basics, and financial management 101.
While it can be daunting to learn all of the skills one needs to be a successful entrepreneur in today’s market, it is easy to get started teaching kids the basics. Here are a few skills that you can include in your lesson plans:
Look for Problems and Niches
Teach your kids to observe the world around them and encourage a culture of problem-solving. Point out products they might like and ask your children to tell you what they like about them. Ask them how they would make a particular item better. If your kids ask for a toy or product, ask them where they can buy it. If something they like breaks, ask your children how they would fix it.
When we were speaking at a conference in California, we met a family with two young daughters who started a business baking cookies. They stood up in front of 200 people and sang their jingle, had a booth set up in the back of the room and quickly sold out of everything they brought.
Get Your Children Out of the Box [Store]
Walmart and Target seem to carry every item in the world, but box stores can be limiting. Teach children outside the box thinking and encourage kids to search out and stumble upon the differentiated value and off-beat products by shopping at specialty stores, rummaging through thrift shops, adventuring at flea markets, and perusing through antique shops…teach your kids that a good idea can be found anywhere.
Entrepreneurship for kids is really about giving them the freedom to dream and see the world differently. By taking kids to junkyards, thrift stores and other places where cast-off raw materials can be found, they will find inspiration. Repurposing “junk” is a big business and the raw materials are usually free.
Educate Your Kids About the Marketplace
Now that your kids have gained a creative edge, they need to learn about the world of products and services. Did they find a cool toy from a long time ago that they could repurpose? Did they notice that people in the neighborhood need help raking leaves or that they have a penchant for cold lemonade? Once they have an idea, hit the library, open up Google and ask, “Who else is doing this?” Are there competitors, and if so, can you be different in some way? Maybe your kids can provide a local version of a service that is not yet available (and it can teach them the basics of supply and demand in the process). Maybe they can provide lemonade for cheaper than the corner store. If the idea is more complex and requires some research to build it, watch Do-It-Yourself (DIY) videos on YouTube or take some free background classes at sites like Khan Academy.
Share Opportunities with Print and Electronic Marketing (And How to Stay Safe)
Now that your entrepreneurial kids have developed their ideas into products or services, it’s time to get the word out! If they are offering a local product or service, they can make some signs to put up around the neighborhood or in the local newspaper. If they are computer whiz kids, they can even advertise for free on Craigslist, build a website, or pay a little money to place locally-focused Google AdWords or Facebook ads. Teaching online advertising skills early on is cheap and easy. Further, teaching these technical skills will help them succeed in the future. Targeting online tests may take a few tries, but whether the attempt at sales succeeds or fails, the investment in skills development will pay dividends far into the future.
Throughout this learning curve, keep a close eye on your child’s Internet activity and email. The Internet opens up new business audiences, but also attracts predators and spammers. Help your children understand what types of messages are business-related and which are sent from unreliable sources. If you are meeting a potential customer, attend the meeting with your child and meet in a well-lit public place.
Encourage Financial Management
Kid Entrepreneurs need money management skills. Business ideas may succeed, fluctuate, or fail, but, long term, the underlying financial structures don’t change much. It is therefore paramount to teach your children prudent financial management skills. Here are three basic ways to build financial knowledge and confidence over time:
- Open a savings account. Bring your child to a bank and open an account with their name. They will feel important taking this adult step and operation of the account will teach them the ins and outs of basic deposits, withdrawals, and bank mechanics/terminology. If you give your child an allowance for basic household chores or help, consider requiring basic contribution/deposit requirements. Show them how savings can build over time.
- Balance a checking account. Before you get to T accounts and big accounting concepts, start small with a checkbook. Sure, few people may actually write paper checks these days, but the principles behind checkbook balancing – and cash flow management – still apply, even in a contactless payment world. Balancing a checkbook will teach your child to perform basic math functions, cash flow calculations, and will familiarize them with maintaining account balances. Millennials often complain about overdraft fees. Avoid this problem by teaching them about the solution early on.
- Invest in a company (stocks/shares) or buy a bond together. Stocks and bonds encourage kids to think long term. Find a company that the child likes and determine the price per share. Open a stock trading account with low commission fees and slowly purchase shares over time. This teaches children about liquidity, equity growth concepts versus interest, the risk of loss, and market timing. Or, consider purchasing a small-denomination US Savings Bond and have them store it safely. The bond won’t grow much at current rates, but it will teach them about another form of savings, patience, and liquidity.
There are two additional things to keep in mind: first, make sure your child doesn’t sell without your knowledge. Selling will trigger a tax event and they may be required to pay taxes. Secondly, as a reward for learning all of these skills, you might consider a family “match” reward for any profit that they do end up putting in the bank.
They’ve Mastered the Basics – Now What?
Is your child’s business taking off? If you need to level up the basic entrepreneurship skills presented here, check out these other helpful entrepreneurship tips from the pros at Entrepreneur Magazine. Is your child’s business a bust? That’s okay, too. Your child may not end up being the next Maddie Bradshaw, but the valuable lessons learned through early entrepreneurship will stick with them for life.