This dad decided to teach his 3 y.o. daughter early how to become a successful investor and sound financial planner. So he came up with a plan which worked perfectly. Here is how he did it:
“To be able to use this strategy, my kids need to understand the following concepts (not in any particular order):
1. How to save money
2. The idea that you can invest and spend the same dollar at the same time
3. How to take out a loan and pay it back
4. How compounding interest works
To start off, I randomly decided we would work on how to take out a loan and pay it back. I figured this concept can easily be built into one of the oldest of American traditions… the good old-fashioned lemonade stand. This also gave me the ability to teach my sweet, energetic, up-for-anything-three-year-old the main concept of loans and obviously, a ton of little lessons on the way. Here is our story…“
Step 1: Making the plan
As parents we are goofy, silly, and spontaneous, but we try to emphasis the importance of making a plan. We planned out our day and then my daughter helped draw pictures of each step.
Step 2: Taking out a loan
This step was key. I wanted my daughter to see the money coming out of our bank account. She told the cashier how much money we needed (in $1 bills), then we counted the money out together. We talked about how we were borrowing the money and we would need to give it back.
Step 3: Buying supplies
As we collected our supplies, we would stop periodically to count our money (just the $1 bills). I wanted her to see the money we borrowed was slowly dwindling.
Step 4: All the hard work
We squeezed a whole lot of lemons and limes. Add some sugar, water, and a sprig of rosemary (let it sit overnight) and we were set to go.
Step 5: Selling in the shade
The next day we set up our stand and put the cuteness factor to the test. Due to state regulations, we needed to do a suggested tip instead of an actual cost. Thankfully no one took advantage of that and kept to our suggested tip.
Step 6: Paying back our loan
After we were done for the day, we went straight to the bank to repay our loan. It worked out perfectly. My daughter was a little sad, so we were able to talk about how we borrowed the money and now we were returning it. In the end she understood, but the reality hurt a little.
Step 7: Reaping the reward
Right after the bank, we enjoyed our reward, she bought herself a steamer and a game. The day was done and the lesson learned. Next step, now I have to figure out how to teach her that you can use the same dollar for investment and spending at the same time.