Trying to raise the next Bill Gates or Blake Mycoskie? Some say entrepreneurship starts at a young age. But if your child’s lemonade stand goes bankrupt, that doesn’t necessarily mean you’ve failed to raise an entrepreneur, according to financial expert Rachel Ramsey Cruze. She’s the daughter of bestselling author and radio talk show host Dave Ramsey, so you can bet her financial education started at a very young age. Dave and Sharon Ramsey taught Rachel how to save, spend and give: three lessons she took to heart.
After graduating from the University of Tennessee, Rachel joined her dad’s team at The Lampo Group in 2010, passing on important financial principles to her generation, many of whom are young parents. She talks about the dangers of credit cards, avoiding debt through college and how to eventually be able to give like no one else. Many of the people Rachel speaks to are teens, so Rachel knows how to make a lesson on money hit home for a young audience.
Financial Lessons Must Start Early
Rachel tells parents money talks need to start at an early age. Instead of getting a set allowance, she suggests parents pay their little ones a “commission” that only comes when a certain chore is completed. “Obviously the work they do will depends on their age, but this will teach them the value of work and how money is made. Work, get paid; don’t work, don’t get paid. There are many people my age that still haven’t made this connection!” she says.
Rachel and her siblings were paid a commission for picking up toys, making the bed and washing dishes. The more chores Rachel did, the more money she earned.
“They taught us about the three basic things you do with money: spend, save and give. This all gave us a solid foundation for understanding money and how it worked,” she says. “When I turned 16, I opened up my first checking account and was responsible for balancing it. There was one instance where I overdrew my checking account and my dad made me go to the bank and apologize to the manager for spending money that wasn’t mine. Trust me, I never made that mistake again!”
Use Childhood Traditions as Teachable Moments
During the summertime, lots of kids set up neighborhood lemonade stands. While this is a fun way to spend a summer afternoon, it’s also a great opportunity to teach children key lessons and encourage their entrepreneurial side.
“Any simple opportunity where a child can provide a service or good and be paid for it is a great learning opportunity for that child. They can set up a snack shop at the baseball field or your office. They can walk dogs, babysit, mow lawns or rake leaves,” says Rachel. “Encourage them to think of creative ways to make money while they are doing something they enjoy.”
Once your child finds a “business” they’d like to pursue, it’s a good idea to walk through the start-up steps with them. Help them track their business expenses and income, design signs and advertisements together, or explain the art of good customer service.
“These are all great business and life lessons that children can learn early in life,” says Rachel.
Make Sure Lessons are Age-Appropriate
While money talks can start very early on, it’s important that the lessons are a good fit for your child’s maturity level and understanding. Here are some of Rachel’s suggestions:
Ages 3-6: When they are under the age of six, the lessons will be simple. Cleaning their room means you do everything but the two toys the child picks up, but they get the credit. When they are this young you need to pay commission on the spot so they have an instant “atta boy” and the savings goals should be short.
Ages 7-12: When they get a little older you can begin to keep track of their chores and have a payday at the end of the week. They can also start setting larger savings goals. My parents matched whatever we saved to purchase a car, so around 13 I began saving and was able to purchase a nice used car.
Ages 13-18: When your kids become teenagers, some may be ready to start doing their own budgets. Open a checking account for them and get them a debit card – NO credit cards. Let them use the money they earn from either chores or their part-time jobs to pay for extra clothes, movies or going out to eat. This will allow your child to learn and make mistakes while they are still under your roof.
The bottom line is financial lessons need to start at home at an early age. And by being well-educated in the ways of money, your child could be better prepared to start the next great, healthy restaurant chain, invent a new board game or run a Fortune 500 company one day.