With the start of a brand new year, new personal and professional goals, and a ‘blank slate’ to begin a new chapter, it may be an excellent opportunity to evaluate how you are teaching your children about money, goal-setting and responsibility (for their future). Forward-thinking financial education has evolved beyond the traditional “allowance” to more sophisticated “real life” lessons in how money is earned, saved and spent.
Below is a great interview with a New York Times columnist and the owner of YNAB (You Need A Budget which is a fantastic personal budgeting app) about allowances and how to talk to your kids about money.
While I wouldn’t say I agree with everything they are saying in this article, it is a unique perspective.
Just a few months ago, I started profit-sharing with my two young kids. I have learned from being a bookkeeper for the last 11 years, and a restaurateur before that, that profit means very different things to different people. My idea of profit has changed dramatically ever since I learned about and became Master Certified in Profit First – a cash management system for businesses that is simple yet transformative.
In the past, I more viewed profit as a number on a piece of paper that could give me bragging rights (or make me cringe) and that it had some tax implications, but nothing much more than that.
However now, profit for me has a whole new meaning. It is actually money in a bank account and that money is proof that I’m doing a good job in running my business. And that kind of proof, or validation, inspires me to do even more, even better, and that is why my business continues to grow and be successful.
But, part of doing more and better means that I am always “on”, always thinking of ways to improve, advance, grow both professionally and personally and help my employees to grow personally and professionally as well. In other words, I don’t have a 40+ hour a week job, I own my lifestyle and both my business and my kids are within that lifestyle. They are definitely part of what inspires me, what I want to teach them, and how I want them to be as proud of me as I am of them. For these reasons and more I have decided to have them share in my quarterly profit distributions, they receive 1%, or .5% each.
I had a focused discussion with my kids about business, about basic income and expenses, and the jobs we provide for others, and about giving back. We then discussed what profit was and why I wanted to share that with them – why it made me better, us as a family better, and that basically working hard, doing the right thing by others, and giving back, can have its rewards.
The actual money they receive goes into their respective savings accounts – which we have strict parameters on how money is spent from these accounts – but that’s for another post!