The Lemonade Stand - A Way to Inspire Girls to Become Financially Savvy

You are driving down the road with your daughter headed to your favorite coffee shop, and she starts asking a barrage of questions. Mommy,

•           What is money?

•           Are we rich or poor?

•           Mom, how much money do you make?

•           Why can’t you buy me the new Katherine Johnson Barbie doll?

•           Why can’t I go to a private school? 

•           Why can’t we have a big house like my friend Peter?

Sound familiar? It certainly does! These are some of the common and awkward questions that your kids may have asked from the time they saw you leaving for work to the times they may have seen you struggling to pay bills. Whether your kids have a basic understanding of finances or are experienced in researching and buying stocks,  it is your responsibility as a parent to teach them financial management concepts that will help them grow into fiscally responsible adults.

Financial literacy classes are often excluded from most school’s curriculum. Luckily, kids can always rely on their first teacher and role model — you. Kids observe, learn, and imitate their parents’ behaviors in every aspect of their lives. For instance, if your kids see you continuously arguing and worrying about money, you inadvertently send a message of stress, conflict, and scarcity.  When you repeatedly say, “Money does not grow on trees” and neglect to explain how money is made and earned, you fail to educate your kids on ways to build wealth. 

What’s the most amusing way to approach the topic of money, and the best age to cultivate basic money concepts? As one of Mark Twain’s famous quotes said: “The secret to getting ahead is getting started.” There are no right or wrong answers to the perfect age. Ideally, one would want to start as soon as possible. The appropriate time is when kids start developing cognitive skills such as counting and solving fundamental math problems. The sooner you begin nurturing basic money concepts, the better chance you will have in helping them build a robust and prosperous relationship with money.

If this is the first time having money talks with your kids, you would want to establish a basic understanding of the value of money, what it is, why we need it, why different things have different price tags, and how to earn it.  You can introduce these rudimentary financial management topics by doing what kids love the most — PLAYING!

One of the most classic old-school childhood business “games” is to start a lemonade business.  Of course, creating a lemonade stand in today’s environment is neither practical nor safe as we are globally practicing social distancing and other COVID-19 safety measures to halt the spread.  As the saying goes, “When life gives you lemons, why not make lemonade”.  This expression implies, every challenge comes with an opportunity.  The pandemic can facilitate an educational discussion on the difficulties of running a business during an economic crisis and the need to save for a “rainy day”.  

Here are three essential financial management concepts your kids can learn when running a lemonade stand business.

1. Embarking upon their first business money venture while developing an entrepreneurial spirit.

Starting a lemonade stand is something that does not come out of thin air. It consists of several steps including: preparing a business plan; developing a budget to include projected expenses based on estimating the costs of the ingredients and other products, ways to promote the business, calculating the expected profit, choosing the right location, recruiting the parents or siblings to help out, and lastly deciding what to do with the money generated from the sales.  Another important concept that you can teach kids, is the need to find ways to pay for business expenses before generating income.  You can assist your kids set up a foundation to fund startup costs while introducing ways to pay for initial business expenses.  

As Plautus once said: "You must spend money to make money”. Kids will learn four indispensable financial pillars: Budgeting, Spending, Earning, and Saving when planning for their lemonade stand business. 

● Budgeting - How much do I need to spend to start a lemonade business and make a profit? Let your kid prepare a list of all the necessary supplies to run their lemonade stand, along with an estimated cost. The process of making a list and developing a budget will help build soft skills such as planning, decision-making, and critical thinking.

●  Spending -  Teach your kids the concept of spending by taking them grocery shopping to purchase the ingredients and supplies for their lemonade business. While at the grocery store, show them the various price tags, teach them that different products cost different prices, explain product discounts, promotional codes, and coupons. This shopping experience will undoubtedly teach kids the difference between a want and a need.  

●  Earning -  Kids will learn that money doesn't grow on trees. They will experience firsthand the concept of working hard to receive a "paycheck" and the need to work long hours, especially if they want to save enough money to buy expensive items. Kids will also get to practice their math skills, to sum up, the total sales they have generated.

● Saving - What do you do with the profit made from the lemonade sales? Should you reward yourself? Should you delay gratification? Should you save all the money made from the lemonade stand and put it in the piggy jar? Or, maybe put the profits in the bank. Or should you share a portion with the siblings who helped run the business or even donate a portion to charity? These are great questions to discuss with your kids. Teach them that money earned does not need to be spent all immediately. Among all the financial pillars, saving is considered the most crucial one, especially with what many families have experienced due to COVID-19. Saving teaches kids a vital strategy for staying out of financial trouble to endure tough and unexpected financially challenging times.

 As a banker, I agree savings is the most crucial financial pillar, but you cannot have savings without understanding the other three pillars mentioned above. Savings comes from Earnings. However, if you do not Budget your earnings properly and Spend all of your earnings, there will not be anything left over for you to save. So, having an understanding of earnings, budgeting and spending is critical in building a savings account.

 As a mother of 2, my children indeed went through the phase that whatever commercial for a toy or a game came on, they would say, “Mom, I want that!” I saw an excellent opportunity to begin a new way to teach my children about the power of the dollar: that power being saving! I always recommend to parents who teach their kids about money to set savings goals with their children. Setting savings goals helps foster discipline. Children need to understand the value of putting money aside to reach goals or prepare for a rainy day. For example, if you earned $10 from your lemonade stand, have your child save a portion of that money to help them develop a habit of saving. This valuable lesson of saving will carry over into their adult life and create lifelong savers. Also, make sure they have someplace to save their money. Most people start with a piggy bank, jar, or savings account at their local bank. Question: Did you know that most banks offer free savings accounts to children? Yep! And if you didn’t know before, you do now! So if you decide to open a savings account for your kids, include your children in the process; let them experience what it’s like depositing into their savings. When my kids earn money from doing chores, or birthday’s or selling lemonade, we set aside a portion of their earnings to deposit into their bank account. Every quarter they receive a bank statement that we review together. This has created a positive attitude toward saving. They say, “Mom, it’s time to go to the bank to grow my savings.” This also shows them over time, if they are consistent with saving money, their savings will grow.

Picture Courtesy of Bernita Bailey

2. Developing lifelong soft skills

The lemonade stand offers a well-integrated, real-life opportunity  to learn a plethora of life-long skills. From the moment they purchase the raw materials to the first sale, kids will gain valuable skills such as teamwork, customer service, being courteous, dedication, perseverance, and more. By cultivating these priceless skills, kids will begin acquiring new abilities that will prove valuable in the workplace, plus get a real-life dose of how to solve challenges more cleverly.

3. Learning vital life lessons and money values.

Patience is a virtue: Setting up a lemonade stand is easy; making your first lemonade sale, especially during a pandemic, may take time and patience. Just because no one showed up on opening day doesn't mean kids should go back home to play with their toys or give up selling lemonade all together. Instead, teach kids the power of endurance.

The value of hard work and persistence: To succeed in life and business, one needs to have motivation, perseverance, and dedication. When your kids feel tempted to give up, remind them that we all experience days when things don't go as planned. In life, we sometimes have to take baby steps to reach our end goals ultimately.

Every failure is a stepping stone to success: What's the best way to learn — by making mistakes! The best lessons in life are learned through trial and error so let your kids make mistakes while running their lemonade business. As adults, we know everything in life isn’t served on a silver platter, and when kids learn by making mistakes, they will learn how to overcome curveballs life throws at them.

Being adaptable to changes: In the virtual and technological world we live in, things constantly evolve. Kids need to learn flexibility and adaptability. Because of COVID-19 impacts, many businesses have had to pivot, offering their services and products online. Change is unexpected and inevitable; being able to embrace change will allow your kids to be open to new opportunities.

For some, money is often the root of many relationship conflicts, and that's simply because it has been for centuries a taboo topic.  Especially today, money is seen as the source of stress, dilemma, and often the "enemy" in many families. However, it doesn't have to be that way. As a parent, you can kick start the conversation on money using the lemon stand business. 

The lemonade stand business is an ideal, enjoyable, and light way to help develop your kid's financial literacy acumen. It encompasses the raw basics of business and financial management principles and concepts. Each year, on August 20, we celebrate National Lemonade Day. If we continue to see improvements in COVID-19 cases, why not take the opportunity this summer to engage your kid with the topic of money using one of the rites of passage – starting a lemonade business.  

Remember, it is never too early to start introducing financial concepts to help your kids become savvy consumers, smart spenders, and budget-savvy planners. 

Recommended Literature Book

Lemonade Winter - A Book about Two Kids Counting Money written by Emily Jenkins and G Brian Karas 

In this book, Pauline is eager to start her lemonade stand; however, it is wintertime! Determined to pursue her little business venture, the book illustrates the concept of making money, managing small businesses, and counting.

This story is perfect for a bedtime story or even an excellent gift to give your kids for a special occasion.

Recommended App

Busykid – BusyKid is an incredible app that helps kids learn basic money concepts such as earning, saving, managing, donating, and investing! No subscription fee is required.

About the authors: Bernita Bailey is the Truist Southern Maryland Market President.   Urmi Hossain is a Pink Space Theory volunteer and founder of Savvy & Smart Her.