Ronnie's Awesome List is proud to present a guest article by Tanya Steinhofer, CFA, CFP®, an independent, fee-only financial planner focused on women and families with young children.
Now that most kids are out of school, parents might start hearing the dreaded “I’m bored” if their kids aren’t in camps all summer. The next time you hear that phrase, instead of just telling them to go outside and play, encourage them to start a lemonade stand and use the opportunity to teach them some useful personal finance and entrepreneurship skills. Here’s the important lessons you can teach them with the help of a lemonade stand:
What’s the goal?
Although my son enjoys selling lemonade and garden produce just for the sake of selling it, it’s usually best to start with the end in sight. What are they going to do with the profits? How much will the goal cost and is it attainable?
What’s the budget?
Kids need to understand that running a business has costs, so you should charge them a reasonable price for any supplies they need to make their product. Ask them what supplies they think they’ll need and help them estimate the cost of these ingredients.
How do we make our stand a success?
In order to run a successful lemonade stand, it’s important for the kids to understand the 5 P’s: product, price, people, placement and promotion. Once they know the cost per cup of lemonade and with some market research, they can determine a fair price to charge. Help them think about who their customers might be, where and when they should sell, how best to display and promote their product. They’ll be well on their way to being successful lemonade entrepreneurs.
Where do we get money to get started?
Some businesses require start-up capital. How will they buy the cups, sugar, lemons and other ingredients to get started? If you lend them the money to buy these things, introduce the concept of a loan as money that must be paid back, sometimes with interest. They don’t get their profits until the Bank of Mom or Dad gets repaid for its start-up loan.
How do we make the world a better place?
While achieving the goal outlined in step 1 might be enough of a lesson, you could also have them allocate a portion of their profits to a worthy cause. Talk about what causes interest them and how it is important to share our money with others to make the world a better place. One entrepreneurial 4-year old cancer patient started a lemonade stand in 2000 to raise money to fight childhood cancer. Alex’s Lemonade Stand Foundation has now raised $120 million to fund 550 childhood cancer research projects at 102 top hospitals and institutions.
In summary, use your child’s boredom this summer as a teachable moment in how to run a successful business and teach them some important life skills along the way.
Tanya Steinhofer, CFA, CFP® is an independent, fee-only financial planner focused on women and families with young children. She lives in Mill Valley with her husband and two kids. She can be contacted at firstname.lastname@example.org or www.redwoodgrovewm.com.