Once you’ve zeroed in on that enthusiasm, how should parents go about helping their children get organized?
Once you define the talent and narrow down the passion, parents need to teach children the language of money and the language of business. Kids need to understand, as an investor, they’re putting their money out there. It really gives them a personal experience with getting their own investors and how that seed money is handled. This way when they get older they’re familiar with the language of a stock market.
Children need to understand that they have to be accountable for what you do with money, and it’s really just about boiling it down to a child’s level. You can help children develop accountability by keeping track of sales and inventory. This is going to help with a business plan as well. It doesn’t have to be too technical because you don’t want to take the fun out of it. Work with your child mapping out their target market, how much they will sell their product or service for, startup costs, when and where they will sell their product or service, and how much they expect to make.
What main points about investing in a business should a parent focus on?
Financially, it is a good idea to plan ahead for how money will be allocated in terms of startup costs, and when the business makes money. If family is investing in a new business, talk with you child about what investors expect from a business.  You can introduce the idea that companies try to make money, and they may also lose money. Investors know that the company needs them to make money and they want to invest in companies that will help them to make that money back, and turn a profit.
This is an opportunity to talk to your child about the stock market. If your child has no knowledge of what the stock market is about, you can tell them it is like a report card of how certain companies did that day. The news will report that the company had more investors, or maybe the company did not reach the projected earnings, or whatever it was on that day.  Help your child to see the connection between the potential profit or loss for their own small business and what happens in the stock market.
Once a child start bringing in some sort of profit, what should be the parent and child’s next step?
They should plot out how the earnings will be allocated. How much of your child’s earnings will go into the bank? How much needs to be re-invested back into the business? What can be spent on fun? Write this down. It makes for a good way to measure and track the progress of the business and your child’s earnings and savings.
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