This is one of the most dreaded questions a child can ask a parent…unless they’re ready for it. The same goes for questions about money…and for many of the same reasons.
Parents often don’t relish talking to their children about money. Whether it’s because they don’t know how, are financially ignorant themselves, embarrassed or ashamed about their own financial situation or learned from THEIR parents that you just don’t talk about…sex…I mean money, it’s just a hard subject to know how to handle gracefully.
Even when parents DO talk about money, they often don’t talk about it the RIGHT way. You talk to, and around, your kids about how much things cost; how expensive things are these days. You talk about how much money this neighbor has and how in debt your friend is. You talk about how other people spend, or don’t spend, their money on this and that.
But this type of negative, mindless financial chatter doesn’t prepare your child for a life where dreams do come true.
Where does money come from?
Talking about money the right way
So, just like the birds and the bees conversation in answer to where do babies come from, you must be ready, willing and able to address where money comes from. In the long run, this may be the more important question to answer correctly because the WAY you answer it can dictate the entire course of your child’s future.
The wrong answer
So there you are…sitting with your child…about to ‘talk about money’ and so it begins, “Well, Bobby, Suzie, money grows on trees…just kidding…paper money is made out of 25% cotton and 75% linen. Our government makes it when we need it and gives it to banks and then they give it to people when they go to their bank. Paper money is made at the Bureau of Engraving and Printing and coins are made in Philadelphia and Denver at the US Mint and the Federal Reserve controls how the whole thing works.”
There, you did it. You told your children where money comes from. WRONG!
Yes, it’s a great idea to teach your children about the Federal Reserve and The Mint and The Bereau of Engraving and Printing and even the history of money itself. A more entertaining way to teach them this information, however, is to sit down together as a family and watch the cartoon movie called Money As Debt on www.YouTube.com.
The point of the conversation, however, is to tell them how money comes to THEM. How THEY get money. Yes, the other stuff is interesting and great to know and understand, but learning how money comes to THEM is a whole heck of a lot more relavant to their future financial success.
The not-so-right answers
Before we get to the best anwer, consider how the following common answers may dictate the direction your child’s life takes.
Money comes from work. You must work hard in order to have a lot of money.
Money comes from having a job. You go to school, then college and when you graduate, you get a nice secure job for the rest of your life (even typing that makes me want to throw up).
Money comes from the goverment. If you get a government job you’re set for life. Great pay, great benefits, great retirement. Or worse, if you have a baby, the government will actual give you money. Ug.
Let’s look at where these three common answers might lead your child in life.
If you tell your child that money comes from hard work, and they choose to have a lot of money in their lives, chances are they will work hard all of their lives. And while there’s nothing inherently wrong with hard work, there are smarter ways to work (I’ll get to that in a bit).
If you tell your child that money comes from having a job, they will probably always have a job. It’s what they know…when you need money, you go get a job. They never learn to think outside of the job box, so to speak, and they’ll grow up being dependent on the job thing. Again, while there’s nothing wrong with having a job, there ARE other ways to make money.
If you tell your child that money comes from the government (I know you think I’m making this up, but I swear I’m not), again, chances are they will grow up a victim of society, dependent on others to supply what they need, never able to have what they want in life.
The best answer
And finally, the answer that will empower your children the most: Money comes from creativity and is an exchange of energy.
In other words, money comes to us when we create stuff and sell it to others. And stuff comes in many forms: products, services, programs and all of THOSE things come from ideas! The cool part about creating is that it involves YOU doing the creating which means that you are working for yourself. You’re in charge. You’re the CEO of your own life. I just love how that sounds…and so will your children.
And the exchange of energy thing? It’s not necessarily YOUR enerygy that we’re talking about. More about this in a bit…
The new money conversation…
Your child comes to you and says, “Mom, Dad, I want to know where does money come from because I want more of it.”
You say, “Cool. Glad you want to know. Money comes from you. You create it yourself.”
Your child asked, “How do I do that?”
You answer this question with a question, “Great question. Let’s talk about how you can have more money. How do you think you could get some more?”
Child says, “You could give me an allowance or just give me money when I need it.”
You say, “Yeah, I’m not opposed to giving you an allowance for the things you need that I’m paying for now that you can then pay for so you can practice with money…but how could you CREATE your own money for other things you need and want?” (Note: this is The Ultimate Allowance I’m talking about.)
Child says “What do you mean CREATE money?”
You say, “Well, I mean what does the world need that you could provide and charge money for?”
Child gives you a quizzical look, “Oh, I don’t know.” or, “OHHH, I get it! I could make a this or a that or do this for those people or, or, or.”
At this point, what happens in the conversation depends on whether the child has been exposed to what we in the financial education industry call Entrepreneurism (and if you want to remember how to spell it, just remember that the letter e always comes first and there’s a lot of them!).
You see, by exposing them to the idea of creating a business themselves, they may never need to have a job, depend on a paycheck from another source, or think the world owes them a living. By empwering them to create their own money, you give them the power to do anything in life. Literally.
The icing on the creativity cake
The icing involves one of my favorite words in the English language…right after the word ‘love’ of course.
The word? LEVERAGE.
In our financial education camps, Camp Millionaire, we explain leverage this way…
“Leverage is…utilizing other people’s time, energy and money…to make ME money.”
Now I didn’t say you are USING other people; I said we are UTILIZING other people’s talents, and paying them for those talents. You see, after you teach your kids to create their own financial resources, the next step is to teach them how to make money but not do some, or all, of the work themselves. This means they are hiring others to do the work for them. THIS is working smarter.
Here are a couple of examples:
Example One: They start a lawn moving service and hire friends to do the work. They charge the customer $10 a lawn. They pay their friends $5 per lawn and pocket the $5 minus expenses. And yes, you’ll need to teach them how to manage their business money in Quickbooks.
Example Two: They get a great idea for a website to sell widgets which are already being made by someone else (someone else’s creativity). They ask you (Mom or Dad) for $200 get the business started. They buy a internet domain name for $20, sign up for a webhost for $10/month