There are almost as many ways to make money as there are ways to spend it. Today’s teens could get into paid employment, get paid by the hour, project or result, earn royalties, from real estate or investments and charge for their time, knowledge or software. Not only will they likely have multiple streams of income at once, but they will change throughout their lives. The internet contains a plethora of financial advice from various online personalities, but how does a young person separate the really useful advice from the noise, fads and scams?
Davinia Tomlinson is the 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 the new book Cash is Queen: A Girl’s Guide to Securing, Spending and Stashing Cash . Tomlinson started Rainchq after working in wealth management for 15 years, growing increasingly frustrated with both the poor representation of women in senior management positions and the low involvement of women in general with their own finances. It can start, Tomlinson said, when today’s entrepreneurs and senior leaders are just 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 about money properly,” and shares five ways to help future entrepreneurs and business leaders learn money skills that will benefit their future endeavors.
1. Help them master delayed gratification
Most entrepreneurs struggle to make money right from the start. But that doesn’t mean they should stop trying. Perseverance, working harder and knocking more bricks will likely make the difference between a founder who is very successful and one who gives up and chooses a more stable career path. Persistence means delayed gratification.
“Developing the gift of patience in achieving goals can be cultivated young to get your kids ready for entrepreneurial pursuits,” said Tomlinson. So how can this happen? Talk about the effort they put into achieving a big goal. Help them see that they got there in the end, even if it wasn’t easy. In fact, the more difficult something was to achieve, the greater the satisfaction in the end.
“Another way to master delayed gratification is to teach them to separate desires into ‘needs’ and ‘wants,’ emphasizing the benefit of waiting to spend.” Otherwise winning their first big client would lead to buying nice offices, expensive subscriptions and other things they don’t really need. Teach them to wait until something is absolutely necessary. “Cultivating delayed gratification bakes into habits that help you reap the entrepreneurial edge.”
2. Introduce them to fundamental financial concepts
Selling a product for millions of dollars may not make one a millionaire, but a young person may not understand this without further explanation. To be successful, a business must make a profit, not just revenue. Tomlinson believes that talking about the money left over, not just what is being earned, helps teach teens valuable money lessons.
Popular ways to make money for the first time include car washing, dog walking, and selling cakes or garage stuff that is no longer needed. It would be easy for someone to focus only on what they’ve made and forget that sponges, water, dog treats, cake ingredients, and everything you sell has a price. Plus the cost of your time and everyone helping. “We need to encourage our future founders to know their numbers,” said Tomlinson.
Like their school schedule, where there is a structure that they memorize, income, profit, taxes and expenses should be concepts that become second nature. Practice on the go, in stores, restaurants and businesses online. “Learning the skills needed to establish a solid budget is one of the best ways to put future founders in control of their money rather than their money controlling them.” Granted, a teen’s priorities will be different than a startup’s, Tomlinson adds, but the basics are the same.
3. Try the 50, 30, 20 method
Tomlinson teaches the 50, 30, 20 method, in which available cash (e.g. pocket money) is divided proportionally based on needs, wants and savings. “A teen’s ‘needs’ can include lunch, bus tickets, pet maintenance, and sports clubs.” “Savages” include everything above that: new clothes, subscriptions, lessons, and possessions. For a teen, saving can be done in a bank account, but as they get older, this can be their investment pot for real estate, index funds, or the like.
“In life and business, frameworks are needed to ensure we cover costs, but also have room to be agile in rapidly changing markets,” said Tomlinson. “This approach gives your teen flexibility and gets them started with their money management skills, critical to a well-run startup.”
Of course, financial freedom requires that expenses don’t increase in line with income or your teen will be trapped in the rat race. As their income rises, if they get part-time jobs or start business ventures, bring your conversations to setting aside more for investments, and talk to them about the beauty of compounding interest and starting young.
4. Help them create a cash machine system
In an ideal world, your money works for you, not the other way around. How to arouse this idea in a teenager? Automation. “Money can almost be gamified now with auto-investing and saving apps,” says Tomlinson, who recommends starting your teen on a sound financial path by opening a good bank account with “jars” or similar functionality to help them get their money’s worth. organize money. according to different goals.
Tomlinson believes this automation should “automatically distribute your money into your piggy banks on a set date each month,” which she says is important because if they did it manually, they could forget about it, reduce the amount saved, or use it unnecessarily spend in the present while sabotaging their future. “Think of this as your payment to the future you. You wouldn’t dream of stealing from yourself, would you?
To promote this system, Tomlinson wants your teen to set up pings to “alert them when they’re approaching zero and when they have a healthy balance each month, with some suggestions on how to put their money to good use.” She said there’s a clear benefit to automating some of your financial tasks in that it “can help your teen track their money more efficiently, making it easier for them to manage their business finances as well as personal finances when needed arises.”
5. Introduce a visualization practice
The tips so far cover how to spend less and keep more, aiming for financial freedom sooner than most people. The final tip involves visualizing the life they want to lead and how money can be used to make it a reality.
Tomlinson said this starts with social media and being able to use the internet without feeling like they have to have what everyone else has. “Talk openly with your teen about what they see on social media, including material possessions and luxurious environments, and talk about what they see as the actual components of happiness. Help your teen find out what makes him happy so he isn’t distracted by what he sees online. Tomlinson suggests you do this by “defining the characteristics of their dream life. For example, where they live, what experiences they want to have and how they want to spend their days.”
Don’t just talk about doing this, she said. Make it a fun exercise. “Have them grab magazines and print out images found online along with glue, scissors and a large piece of paper or cardboard to make a collage of their dream life.” Find inspirational phrases and words that represent the dream life they depicted. The result is their personal vision board, a single snapshot of the grand plans they have for their lives. “Have them put their completed board somewhere they will see it regularly,” Tomlinson added, so they are constantly reminded of what they are working toward and saving for.
Many successful entrepreneurs use the power of visualization to achieve their business goals. Practicing this exercise from a young age can help those images become reality much sooner.
Helping your teen establish good money habits can help them for the rest of their lives. Tomlinson knows: “It’s almost impossible to be good at something without learning how to do it.” She wants parents of teenagers to help them build their wealth and save.
Learning delayed gratification, common financial terms, adopting a money organization system, using automation and visualizing their dream life will help your teen dream big and have fun too. By doing so, she believes you’ll help “set them apart from their peers, increase their happiness, reduce their stress, and increase their financial literacy, which will pay dividends in the world of entrepreneurship.”