Her father taught her about money by coaching her to bid down the price of items she liked. He would then stand back while Carolin worked her magic.
“Go up there and ask what the price is. When he says ‘10 euros’, then say, ‘Well, I’ve only got five. Can I still get it?'” Hasse said, recalling her father’s words.
“Usually it worked. Maybe it was because I was a small child who knew her money,” she said.
Now 16, Hasse has two jobs — one as a riding instructor and the other as an English tutor. Soon she hopes to have enough money saved to put toward a course to earn a riding certificate. Hasse was lucky to learn about business early on, with lessons based on real-world experiences. Not many young people have the same chance.
A recent OECD study showed that financial literacy among young people is woefully lacking: In 13 countries and economies, one in seven students are unable to make simple decisions about everyday spending.
Daryl Bernstein, an entrepreneur in Santa Barbara, California, in the US and the author of Better Than a Lemonade Stand!: Small Business Ideas for Kids, said childhood is the right time to develop business skills. The 38-year-old wrote the book when he was 15. There are some advantages to dabbling in entrepreneurial ideas as a child, he said.
“You don’t have to quit your job, and you’ve got time on your hands,” Bernstein said. ”A lot of the people who have had huge successes when they were 20 to 25, like the (Mark) Zuckerbergs of this world, were honing their skills for 10 to 15 years prior to that.”
Bernstein, who just sold a business that provides digital signatures, learned early on to look for a need and build something to meet that need. One need he filled: bringing newspapers from the curb up long driveways to doorsteps.
“I would see my neighbours very grumpily at the crack of dawn in coats and boots stumbling down an icy driveway,” he said. People were willing to pay more for his service than the cost of the newspaper.
Of course, there are other important principles children should learn about money. Here are three important ones.
Principle 1: Work means money
Peggy Rosser’s granddaughter, Hannah, has been receiving dimes for housework since she was three.
“Hannah learned that work results in money, which results in the ability to purchase something,” said Rosser, who is an adviser at the Angelo State University Small Business Development Center in San Angelo Texas in the US.
After Hannah, now age 5, fed 15 dimes into a soda machine to buy a cold drink, Hannah and her mother discussed another point — instant gratification versus the importance of saving. Even at young ages, children can understand these ideas, Rosser said.
“Hannah’s little purse didn’t have as much money in it,” Rosser said, “She very quickly learned not to spend her money that way.”
Principle 2: Bucketing
A system known as “bucketing” among personal finance professionals can also serve as a simple concept for children.
Where adults may invest into one account for a college fund and save into another for a vacation, children can separate their money just as easily, saving notes and coins into homemade marked cans or piggy banks with special slots for saving, spending, charity and more.
The “saved” money might be for larger purchases like a new video game or a special doll, while the “spending” money is more like pocket change, used for impulse buys like candy bars or an inexpensive must-have trinket. Money marked for charity or “sharing” is, of course, for donating. Some special piggy banks have a fourth slot, meant for long-term savings for things such as university expenses or a special trip.
“It’s all about making decisions. If you teach children at a young age to make good decisions, that will transcend into their adult years,” said Rosser, whose grandchildren have savings marked for big money, little money and share money.
Author Barbara Kettl-Romer suggests that children learn to set priorities with their money by having full control over their allowance.
Likewise, parents should understand their own relationship to money to better teach money management to their kids, said Kettl-Romer, who is based in Gunzach, in southern Germany.
“Children are inclined to imitate their parents or to behave in the opposite way. So, if you spend your money on a whim, your kids may do the same,” said Kettl-Romer. “The kids of Scrooge-like parents may swear never to be as tight-fisted as their parents.” She urges parents to think about what money means to them and about their own spending and saving habits before teaching their children these principles.
Kathleen Gurney, the chief executive of Financial Psychology Corporation and a psychologist specialised in money management, has described nine money personalities. Maybe you’re a “high roller” willing to take risk for the chance of achieving greater financial gain. Or perhaps you’re a “safety player” who prefers a cautious and arms-length approach to money management.
“When parents discuss money matters with their children, they’ll be sharing values, as well as information,” Gurney said.
Principle 3: Salesmanship
Kettl-Romer’s book How To Teach Your Kids About Money was published in 2009 and was one of only a few books about parenting and money in German, she said.
“In Germany, talking about money is taboo. Maybe it has to do with the Protestant Lutheran heritage or the worry that showing you have money will cause others to be envious,” she said.
But Germany isn’t the only place where this is the case. While signs of wealth might be obvious in places like the US and the Middle East, aggressively selling one’s self, one’s abilities or one’s wares is uncomfortable in many parts of the world.
“In a country where engineers are idolised, aggressive selling is often seen as a form of manipulation,” said Kettl-Romer.
Yet, learning to sell is a critical part of understanding how to grow money and becoming a business person. Here again, the flea market or a lemonade stand are a good place to learn salesmanship. In the end, sales conversations all have a similar anatomy.
The seller must create a need (“Boy, it’s hot out here”), show the advantages of the product (“This lemonade is made with organic lemons”), answer any objections (“It’s less than the cost you’d pay at the cafe”) and close in for the sale (“Do you want small or large today?”).
Rosser said: “With practice, a simple phrase can close the deal.”
Whichever skills a child is learning, it is practice that will make a difference in the long term, says Bernstein.
“My advice is to get out there and try things…People say it takes 10,000 hours to become an expert. Many leaders who we look up to in all walks of life… got their 10,000 hours of practice while they were still kids.”