If you listen to the Dave Ramsey Show, you may have heard the 14-year-old who called in and told his story about being $21,000 in debt. His debt was mostly to his brother, with $1500 to his father.
An entrepreneurial mindset at 14 is awesome, but I don’t think it’s a good idea to let your teen go into over $20,000 of debt to his sibling. Maybe the intentions were there, but that’s an expensive lesson for a teen.
You can see the segment here:
I believe we should raise entrepreneurial kids. Cameron Herold makes some great points about this in his TED Talk: Let’s raise kids to be entrepreneurs.
But we can teach our kids to be entrepreneurs without the debt.
Why Teach Your Kids to Be Entrepreneurs?
Entrepreneurship isn’t for everyone. Some kids want to be professionals or trade workers, and there’s nothing wrong with either of those. But an entrepreneurial mindset is helpful for everyone.
Even if your kids decide to go to medical school, law school, or trade school, they can benefit from the basics of entrepreneurship.
Here are four reasons we should instill an entrepreneur mindset:
- Work Ethic – When kids learn how to think like an entrepreneur, they learn work ethic by default. They see how their level of hard work directly relates to their level of success.
- Where Money Comes From – Money doesn’t just come from work, but that is a primary means. Entrepreneurship teaches kids how money is generated in many ways and how to make it exponential.
- An Out-of-the-Box Mindset – Entrepreneurs think differently, which is a good thing. Whether your kids want to go into business or learn a trade, thinking outside the box helps them create new and better ways of doing things.
- Life Skills – Everything you learn by being an entrepreneur can be used in the rest of your life. Things like goal setting, habit building, taking action, investing, time management techniques… I can go on all day listing the skills entrepreneurs learn and need to know.
Those are four of many reasons kids will benefit from this type of mindset and this way of thinking.
Entrepreneurship teaches life lessons. A lot of life lessons.
Types of Businesses
One of the best ways to teach your kids to become entrepreneurs is to let them start their own business. Again, we’re providing a safe place to fail here, so I don’t mean taking out a business loan and opening a retail store. I’m talking about business on their level.
Start by teaching your kids how businesses make money. This includes, but isn’t limited to, the following:
- Products – The most simple business is a business that buys products at wholesale and sells them at retail. Kids understand this easily by going to your local Walmart, grocery stores, or furniture stores. Teach them about markup. Walmart, for example, has very little markup, but they get their money from the volume of sales. Jewelry stores’ markup ranges from 40% to 500%. Used furniture stores have a high markup as well. But the space needed for jewelry is significantly less than furniture stores need. These are all concepts your kids can visually understand by simply going to these stores. A lemonade stand demonstrates product sales on your kids level.
- Services – You provide a service; you get paid. Services are also easy for your kids to understand, because it’s a simple concept. Lawn care is a perfect example and a perfect way for your kids to get into providing a service for a fee.
- Subscriptions – Magazines are the classic example, but now with companies like Netflix, Youtube, and other streaming services, your kids see this daily.
- Membership – This simply means your clients pay a membership fee and get access to something you offer worthy of the membership cost. Everything from your local gym to a web-based membership service. The main thing for kids to understand here is that you need to have something valuable enough to get people to pay for it.
- Advertising and Affiliates – This is one of the less common ways, but it’s still an option. Newspapers and television were the classic examples, but in today’s world, this happens through web traffic and uploaded videos. You can always teach your kids to start their own blog and they’ll begin to see how they can make money from advertisers and affiliates.
Figure out what your kids are interested in and focus on that. If they’re not interested, they’re not going to retain what you’re teaching them.
Starting Their Own Business
Take any example from above and help your kids start their own business.
If they open a lemonade stand, they may not need to go through the actual legal process for real, but go through it with them as if they were actually doing it.
- Determine Interest – First you’ll need to figure out what they are most interested in. Then you can start working the plan. The most important lesson here is to do something they love in the first place.
- Survey the Market – Teach your kids how to figure out who their market will be, based on the type of business they choose. A little internet research goes a long way. The most important lesson here is to know their market so they know how to target said market.
- Create a Business Plan – There are plenty of free tools online to create a business plan. The most important lesson here is that you must start with a plan.
- Form a Legal Business – In the real world, would this business be an S Corporation, C Corporation, LLC, Partnership, or Sole Proprietorship? Help your kids figure out which one would be best for their business. This is also when they would decide on a name for the business — they’ll like this part. The most important lesson here is that the type of business you form is based on the type of business you choose.
- Hire Employees – Once the business is set, it’s time to hire help. Your kids can literally do this with younger siblings, or they can theoretically do this on paper. The most important lesson here is to learn delegation, because we only have so much time in our own life.
Becoming an entrepreneur isn’t just about starting your own business, it’s about a mindset. That’s why it makes sense to teach these skills to any child, even if they don’t plan to start their own business.