Lemonade Stands, Toys and Meal Delivery

My son, Drew, spent a good portion of his summer running a lemonade stand. It later morphed into a lemonade stand/garage sale when sales started to dip. I guess the cuteness factor has an expiration date.

Several years ago, I wrote about the first time my kids tried something like this. I was pleasantly surprised at how successful their hot chocolate stand was. It left Anne and I scrambling on how to coach them on what to do with their earnings.

Ultimately, we decided on the 80-10-10. Where you give 10%, put 10% in long term savings and keep 80. (though in this case they kept 70% since they needed to reimburse us for the supplies).

It got me thinking about what lessons we can teach our children and grandchildren about money to help them develop healthy habits. Our kids are growing up in a world where spending has never been easier.

I heard recently that some meal delivery services will actually give you your lifestyle spending numbers if you call and ask them. There is accountability I don’t think any of us are eager to pursue.

So, what are some lessons we can press into our kids that can help them develop healthy habits?
 
Wait before buying

Drew and I were at the bookstore and he was scoping out some toys with plans to get something with his own money.  He was having a really hard time deciding between two building sets and a science experiment kit. Ultimately, he decided he needed both building sets. We talked about the total cost and how much of that would impact what he had in his savings. He was undeterred.

I said, first of all, we get one of these $10 cheaper online, but instead of ordering it now, we’ll get one here and see how you feel tomorrow. And that often we’ll feel different if we just give the “give-mess” time to dissipate.

He eventually bought the toy but did so much later after he had saved up to the point where he would still have his target amount left.

Even instituting a 24-hour rule for nonessential purchases teaches them that wanting something and buying something do not have to happen at the same time.
 
Drive to the restaurant

I’m specifically referring to older kids here. Adults can absolutely decide convenience is worth the cost. Trading time for money is definitely a worthy approach.

 But I think we should look at it differently with our kids.

If someone uses a meal delivery service for a one-person meal twice per week, it has the potential to add up to a convenience cost in the neighborhood of $1,000/year.
 
Teens, drive to the restaurant and pick up the food.
 
Exposure to investing

An introduction to learning about compounding returns is to let them participate in it with their own money. It’s also a useful way to learn about their risk tolerance.

Investing has the added benefit of creating an invisible barrier between the money and the spender. Creating the appearance of less spendable money combined observing how an investment’s value may change over time can be a powerful incentive to spend wisely.
 
Know your spenders and savers

You probably know your kids already. But each of our kids will need different incentives. Some are more naturally inclined to be frugal and are better able to delay gratification. Others not so much.

Our spenders will need much more coaching on how to monitor expenses. They’ll need spending guardrails. One strategy is to give them money and a timeframe in which it needs to last.

There are countless tools we can use to help our kids gain awareness: spending software, child/teen centered banking, and credit cards that provide tools they can use to be more mindful.

Ultimately, I believe the goal isn't to teach our kids not to spend money. It's to help them understand that every dollar comes with a choice. Giving them the opportunity to make those choices while the stakes are still small can help build habits, they'll carry with them when the decisions get much bigger.

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Andrew Eppes, CFP®

This material is provided for general educational purposes only and is not intended as individualized investment advice or a recommendation to buy or sell any security. Investing involves risk, including possible loss of principal. Investment values will fluctuate, and past performance is not indicative of future results. Consider a child’s age, objectives, time horizon, liquidity needs, and other relevant circumstances before making financial or investment decisions on the child’s behalf.

Andrew Eppes is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. www.SIPC.org. Nexus Advisors, LLC is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. 14241 Dallas Parkway Suite 1200 Dallas, TX 75254 972-348-6300. The views and opinions expressed are of Andrew Eppes only. They are not necessarily those of MML Investors Services, LLC. 

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