Business 101

If you have kids, you are no doubt familiar with the refrain of “I really want to buy X” or “I need a way to make more money so I can do Y.”  I hear it a good bit in my house, and recently have decided that it’s time to teach my kids some lessons about business and the value of money.

I grew up in a very rural community and was surrounded by other kids who were dairy farmers.  They were up every day at 5 or so, worked all day and wrapped up at 7 or 8 at night (on a good day).  My kids don’t have anything close to that lifestyle.  Their days are spent engaged in either school or activities they want to do.  I don’t begrudge them this opportunity, but it seems to distort the value of work and its relationship to money. It is a constant battle to raise kids without a sense of entitlement when they are not worrying about the necessities of life, especially when all of their friends seem to have an endless stream of new stuff.

So, in order to combat this, my wife and I recently started our daughter in her own business as a part of her income.  She has started doing all of the laundry for our home, and will be taking over the responsibilities from the adults permanently.  Here is how we set it up:

• There is a 3-week training program in which she has to prove that she can handle the responsibility and do the job properly.  During this training period, she makes less than what she will make going forward.  She is responsible for showing us that not only can she do the job, but that she can do it with the proper attitude and work ethic.
• We worked through the cost per load for materials and then negotiated the retail price per load.
• Upon completion of the training program, we will execute a simple contract that lays out the terms of our agreement.  She will have the opportunity to negotiate a new rate at that time since she will have completed the training program.
• She is responsible for purchasing the materials to get the laundry done.
• She will be responsible for setting up her own instance of of a financial package (Freshbooks or similar) and creating invoices for her services as well as tracking payments
• We will review financial statements each month so that she understands the language of business and can converse freely about P&L, balance sheets, retained earnings, gross margin, etc.
• We will work through the decisions of how much needs to be re-invested in the company vs. taking profits out.
• She will have the opportunity to add new areas to her enterprise as we move along.

Our goals for this are pretty simple:

• Teach our kids the direct correlation of work to money
• Teach them early on the value of owning a business vs having a job
• Teach them to look for new opportunities in the area they are operating in, and teach them how to make decisions
• Teach them the vocabulary of money

I am looking forward to seeing how this works out.

Have any of you done similar things with your kids?  If so, what can you share about the experience that would help others (like me) who are just getting started?