Youth Financial Literacy & Entrepreneurship: Watching Seeds Grow

When we consider education, we focus on our children being well-read, able to figure out the area of a triangle, knowing who won the Civil War, and knowing what Ag stands for on a periodic table.  We provide little formal education on how to make money and what to do with that money once you have it.  But as a former business education teacher and a parent, I’d argue that financial literacy is just as important to our children’s success.  Or least, for us to successfully get them out of our house as functional, independent adults (the whole goal of parenthood, right?)

What I learned about money (at least before I went to college and actually majored in finance) was from my parents, with money earned through part-time jobs and allowance.  As a teenager, I babysat.  Many of my girlfriends did the same; the guys cut grass and shoveled snow.  We told people we were available to do the work, decided the fee, did the work, collected payment, and figured out what to do with all that money.  We didn’t think about it then, but these tasks are the essentials of being an entrepreneur.  I’ve reviewed the same steps with my little group who are involved in one of the largest youth business operations around – my Girl Scout troop and their cookies.

Watching Seeds Grow is a guide about entrepreneurship for young people written by son and father, Keith Greer and Peter Greer (President & CEO of HOPE International), which offers simple, easy-to-understand lessons for youth about financial management.

The book opens with a few stories of youthful entrepreneurship, starting with Keith’s (the son) haphazard beginning in business, selling beans in a Rwandan market when he came across a few handfuls of leftover beans.  The stories highlight product-related businesses (beans, candles, tacos, donuts), but children should also be reminded that service-related endeavors, such as tutoring, shoveling snow, and painting friends’ nails, also require the same steps.

The second part of the book lists for parents ten steps of entrepreneurship.  Even for the child who has no interest in running their own business, they are important lessons which can be scaled to the appropriate age: understanding finance and the concepts of hard work, ownership, investment, and generosity.

For instance, Step 2: Start a Savings Account.  For the youngest child, the parent can begin this lesson with a simple bank at home – a jar, a plastic piggy bank, an envelope – and the discussion of putting away a little bit of whatever money the child gets for birthdays or holidays or A’s on the report card to save for the future.  Perhaps start with a tangible goal, like a particular toy or activity that’s relatively expensive, but reasonable.  As the child gets older, you can discuss more about short-term (that new iPhone) and long-term (college) savings goals.  Additionally, as the child gets older, parents can introduce them to the process of putting their money in the bank and earning interest (even if it is just a little bit), and then later the concept of investing (Greer’s Step 6).

An interesting parenting issue which Greer includes in the discussion on teaching children the value of hard work, is the debate about allowance.  Should allowance be tied to chores or other required activities or should it be given, no strings attached?  Greer suggests that by relating allowance to chores, parents teach children the concept of working for their money. Parents might even offer the opportunity to do additional chores to make a few more dollars.

The last section of the book is worksheets for the child who is considering their own business, even as simple as their own lemonade stand.  Applying the ten steps of entrepreneurship, the worksheets lead the child and parent through developing a business concept, considering expenses and setting a price, planning marketing and promotions, and selling the product.

Watching Seeds Grow is an easy-to-read guide which breaks down information about financial management into tangible, actionable steps for the young entrepreneur, the kid working a part-time job, or the kid getting an allowance for taking out the trash.

Peter and Keith Greer, Authors of Watching Seeds Grow

A complimentary copy of Watching Seeds Grow was provided for review; all opinions and comments are my own.

Join the conversation on Facebook: Just Piddlin' with Frances

Sunk Costs of Parenting

Economic theory suggests that rational decisions should not be made on the basis of sunk costs, that is money already spent and unrecoverable on a project.  People’s behavior, however, often is quite the opposite, in that we do make what economists consider to be irrational decisions based on unrecoverable lost resources. 

For example, let's say you buy a pair of shoes, get them home and realize they hurt your feet (for sake of discussion, pretend you spilled coffee on the reciept and now can’t return them.)  Do you: 

(a) wear them because you paid good, hard-earned money for them, or 

(b) give them away.  

A rational decision would be “b”, because how much you spent on the shoes is now irrelevant to the decision of whether you will cause yourself foot pain.  If you chose “a”, you are perfectly suited to be a parent.

It's hard to ignore all those parenting "sunk costs"

Every few months, I go through a pile of registration forms and the family calendar: tennis lessons, swim team registration, music lessons, basketball team fees, tennis team fees, some other random stuff.  And then in my head I replay a quick loop of the past few months.  The soundtrack goes something like this: 

“get your stuff/equipment/music for the gym/pool/rehearsal, hurry up.  Put on your socks.  Hurry up now, don’t forget your other stuff/equipment/music!  Where are your socks?  Bring your homework to do while you wait for your sibling to practice/rehearse/play and don’t forget a pencil, hurry up!  Where are your socks?  Did you practice today?  When are you going to practice?  There’s no point in going to lessons if you aren’t going to practice.  Go practice.  Stop crying, go practice.  Forty-five minutes.  Yes, all at one time.  Stop whining.  Hurry up.  You won’t die from cold feet.” 

Why, in the name of all things chocolate, why would I subject myself to this daily ritual?  Yes, I said daily.  With four kids, the activity changes, but the process occurs everyday.  And this isn’t even to get to school, this is after they get off the school bus.

Because as parents, we think, “I’ve already spent a gazillion dollars on rackets and bats and balls and team uniforms and knee pads and shoulder pads and I’ve bought a piano and a tuba and spent another gazillion dollars on lessons for the past ten years, so dang it – we’re going to keep at it.”  According to economists, this would be an irrational decision.  (Really, is anyone surprised that parents make irrational decisions?)

According to theory, a rational decision maker would not consider all those gazillion dollars already spent, those are our “sunk costs”; we’re not getting that money back.  Our future decisions of whether we are going to register for another season, should be based on the future monetary costs and our desire to continue in the endless loop of prodding little people to activities and pushing them to practice, and the attendant fussing and crying (by all parties).  Actually, you would think any decision maker would not subject themselves to the emotional turmoil of getting a kid to practice guitar or learn the words to a song.  But then, where would we be without music?  (Thanks, Joe Jackson.)

Each week, after the meltdown of getting in the car with all the appropriate stuff, I tell my kids “this is it, this is the last time I’m doing this, if you’re not ready next week, we’re not going.”  I think they don’t even listen to me anymore.  They know that next week, we will do this again.  And the week after that.  And the season after that when I sign them up again.

I never said I was rational (or that I passed Economics).