There are nearly as many ways to earn money as there are to spend it. Today’s teenagers could end up in a salaried role, getting paid by the hour, project or result, earning royalties, from property or investments and charging for their time, knowledge or software. Not only will they likely have multiple income streams at any one time, but these will change throughout their lifetime. The internet holds a plethora of financial advice from various online personalities, but how does a young person discern the genuinely useful advice from the noise, fads and scams? 5 ways to teach future entrepreneurs about money Davinia Tomlinson Davinia Tomlinson is founder of Rainchq, a platform that helps people take control of their financial futures and live their best, most financially abundant lives, and author of new book Cash is Queen: A Girl’s Guide to Securing, Spending and Stashing Cash. Tomlinson started Rainchq after 15 years working in investment management, becoming increasingly frustrated with both the poor representation of women in senior management positions and low engagement of women in general in their own finances. It can start, said Tomlinson, when today’s entrepreneurs and senior leaders are as young as 7-years old, which is when children’s earliest money habits are formed.
Tomlinson believes we, “pick up bad habits and copy others because we were never taught properly about money,” and shares five ways to help future entrepreneurs and business leaders learn money skills that will serve their future endeavours. 1. Help them master deferred gratification
Most entrepreneurs struggle to make money from the get-go. But that doesn’t mean they should stop trying. Pushing on, working harder and turning over more stones will likely mark the difference between a founder that succeeds in a big way and one that gives up and chooses a steadier career path. To be able to persevere involves delayed gratification.
“Developing the gift of patience in achieving goals can be cultivated young to set your children up for entrepreneurial endeavours,” said Tomlinson. So how can this happen? Talk about the effort they put in before they achieved a big goal. Help them see that they got there in the end, even if it wasn’t easy. In fact, the harder something was to achieve, the greater the satisfaction in the end.
“Another way to instil mastery in deferred gratification is to teach them to separate desires into ‘needs’ and ‘wants,’ emphasising the benefit of waiting before spending.” Otherwise, their first big client win would lead to purchases of fancy offices, pricey subscriptions and other things they don’t actually need. Teach them to wait until something is absolutely necessary. “Cultivating delayed gratification bakes in habits that help you have the entrepreneurial edge.” 2. Introduce them to fundamental financial concepts
Selling a millions dollars of product might not make someone a millionaire, but a young person might not grasp this without further explanation. For any business to be successful, they need to make profit, not just revenue. Tomlinson believes that talking about the money that remains, not just what is earned, helps teach teenagers valuable money lessons.
Popular first-time ventures into earning money include car washing, dog walking and sales of cakes or no-longer-required garage items. It would be easy for someone to only focus on what they made and forget that sponges, water, dog treats, cake ingredients and anything you sell has a cost. Plus the cost of your time and anyone who helps. “We need to encourage our future founders to know their numbers,” said Tomlinson.
Like their school timetable, where there is a structure that they learn by heart, revenue, profit, taxes and expenses should be concepts that become second nature. Practice when you’re out and about, in shops, restaurants and using businesses online. “Learning the skills involved in setting a solid budget is one of the best ways to make any future founder in control of their money rather than their money controlling them.” Admittedly, a teen’s priorities will be different to those of a startup, adds Tomlinson, but the basic principles are the same. 5 ways to teach future entrepreneurs about money getty 3. Try the 50, 30, 20 method
Tomlinson teaches the 50, 30, 20 method, where cash available (pocket money, for example) is split proportionately according to needs, wants and savings. “The ‘needs’ of a teen might be lunch, bus fare, pet maintenance and sports clubs” ‘Wants’ include everything above that: new clothes, subscriptions, classes and possessions. For a teenager, saving might be done within a […]
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