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Teaching your children the basics of entrepreneurship and investing

SINCE THE AGE OF SIX, BRANDON CELESTINE HAS BEEN filling a personal treasure chest with stocks that include: Donna Karan, AOL, Microsoft, Sony, Rain Forest Cafe. Disney, Hasbro, Board Kids Entertainment, Viacom and Campbell Soup. Following the philosophy of financial guru Peter Lynch, Celestine invests in what he knows. "I look at trends to see what others are wearing and what products they're buying. That's how I ended up with Donna Karan; I noticed all the kids my age were wearing [the designer line]," says Celestine, who serves as research analyst for the Young Investors of America investment club in Detroit.

Today, Celestine's portfolio is worth more than $25,000 (including the value of a mutual fund to which his parents have made regular contributions over the past eight years). The 14-year-old investor plans to use the money to help foot the bill for college, although at this point, he's undecided about where to attend.

Young people like Celestine, who are exposed to the concept of saving and investing at an early age, are more inclined to stick with it when they get older. They tend to have a better understanding and appreciation of the value of money. This is why it's crucial that you adopt and adhere to principle No. 6 of our Declaration of Financial Empowerment (DOFE): to teach business and financial principles to my children.

You need to do whatever you can to give the children in your life (including nieces, nephews and grandchildren) a head start. Don't wait until they are ready to leave home and enter college, where they'll learn money management by trial and error. Nor do you want your children to learn the financial facts of life through advertising images of the good life and testimonials by celebrities, athletes and music artists sporting platinum and ice--you know, platinum crosses encrusted with diamonds--one day and crying bankrupt the next. Starting a profitable business and investing in the stock market are a more effective and more "real" means for young people to learn about money, power and respect.

There are several lessons your children need to grasp about money management. Even if you are a new saver and investor, you can learn together as a family. A family that saves together stays together. The first step in to set aside a couple of hours on a regular basis to talk to your children about budgeting, investing and entrepreneurship.


* Review the family budget with your kids. Let your children see you pay monthly bills. Expose them to your investment plans and discuss how you intend to use stocks and mutual funds to finance their education or other goals, suggests Marjorie Grace, president of Grace Financial Services, an investment planning firm in Oakland, California. Teach them to save in order to buy the things they want. Of course, you will have to practice what you teach. Budgeting begins with tracking expenses every month (e.g., school supplies, CDs, movies, snacks and clothing). Have your children create a budget, says Grace, writing down everything they spend so that they have a complete picture of their spending habits.

In order for budgeting to work, children must respect money. Remember the old saying, "A penny saved is a penny earned." For most kids these days, pennies, nickels and even dimes are no longer considered real money. Children will throw a penny away without thinking twice. Have your children put loose change in a jar; the result might astound them. Their take could equal up to $40 to $50 a month. That's not chump change.

* Buy goods and services intelligently. Children need to know how to get their money's worth on the things they buy (see "Buying Power," March 2000). Teach children to plan their purchases and avoid impulse buying; have them practice comparison shopping by checking prices at different locations, advises Jeffery Fox, consulting editor of Investing For Life, a self-study course for teens, which covers saving, investing, consumer spending and other issues on managing money. Take your children shopping with you. Help them develop the art of creative purchasing--buying generic brands, in bulk or secondhand goods, adds Fox, who also serves as director of investment education at the National Association of Investors Corp., an investment education association in Madison Heights, Michigan. Also, show them how to shop for bargains and use coupons.

* Avoid the credit trap. A lot of college students are lured by special credit card offers, only to run up balances in the hundreds, if not thousands of dollars. To top it off, they're strapped with high interest rates of around 18% to 20%. To inexperienced young people, credit cards may seem like easy money; they may not realize that there are several hitches. Before they know it, a series of late payments looms and their credit rating is damaged. A tainted credit history could ruin their chances of getting a home or a car when they are older. Break the cycle early by teaching children to pay with cash. Let them see you using a bank debit card instead of a credit card to purchase online, buy airline tickets, reserve a hotel room or rent a car.


* Earmark money for savings and investments. Your child's financial education should begin as early as age three. Even preschoolers know a quarter is worth more than a dime. Somewhere around age six, start giving your child an allowance. Open up a savings and a brokerage account and have your child set aside at least 10% of earnings from odd jobs, allowances and monetary gifts.

* Get your children to start investing early. Provide your children with a sound financial education through stocks and mutual funds. A few mutual funds provide children with not only an investment vehicle, but also a teaching tool. For example, the Stein Roe Young Investor fund (SRYIX) publishes a newsletter, Dollar Digest, which features interviews with CEOs and profiles the financial performance of companies held. Children will appreciate the kid-friendly writing. Custodial accounts for the Young Investor fund (; 800-403-KIDS) can be started with as little as $100, which requires automatic deposits of $50 a month thereafter.

Learning the basics of investing will give your children "extra credit" in the classroom, says NAIC's Jeff Fox. For instance, stock prices are reported as fractions, an important math concept for grade-schoolers. But if basic math is an anathema to most kids, how can you get them excited about stock splits, P/E ratios and betas? Answer: by having them watch how their money grows.

Two years ago, when Celestine first bought shares in Datalink Corp. (Nasdaq: DTLK), the data-storage company was trading at 53 cents. As of March, its share price was $36. Similarly, he has watched Sony's (NYSE: SNE) stock climb from $80 to a 52-week high of $314 a share (no doubt thanks to the popularity of the entertainment giant's Playstation product).

* Make money management fun. Take your children on field trips to such institutions as the New York Stock Exchange or the Federal Reserve Bank in your area. Also, play board games such as Monopoly and enter Web-based stock picking contests.

Encourage your child's school to participate in stock market games such as the one sponsored by the Securities Industry Foundation for Economic Education (; 212-608-1500). The 10-week simulation program is open to grades four through college. Student teams compete against one another during the fall and spring semesters, investing $100,000 in publicly traded stocks. The money's fake, but the lessons learned are real.

* Give investments as gifts. Encourage friends and relatives to give stock for a birthday gift, a Christmas stocking stuffer or a graduation present. Challenge your children to keep track of their investments' performance. Also, to avoid a huge tax bite, establish a custodial account for your children under the Uniform Gift to Minors Act (UGMA), available at banks and mutual fund companies. Shares are held in trust until a child comes of age. You can open an account for a minimum of $100 and as little as a $50 can be added over time. Purchases for minors must be reported on a U.S. Gift Tax Return (Form 709).

* Get your kids involved in investment clubs. By encouraging them to join or start a club, your children will learn how to pick and track stocks like the pros. Investment clubs provide structure and discipline to new investors. Youth clubs are organized the same as any other club. (For investment club information, contact the NAIC at or 877-275-6242.) The club must choose members, select officers, set a date for meetings, collect monthly dues, open brokerage and bank accounts, write bylaws and form a legal partnership. The only difference: parents must sign custodial agreements with the partnership, since members are too young to buy stocks themselves and can't claim their shares until age 18 or 21, depending on the state. Youth can recruit fellow classmates, church members or teammates. Don't overlook civic organizations such as the Boy and Girl Scouts of America. Also call on adults from your church congregation, coaches or teachers to serve as advisors.


* Expose children to local business owners. Visit black-owned businesses in your community and in other cities when you are vacationing or visiting relatives. "Show your kids how some people make a very good living owning a local beauty parlor, convenience store, funeral home or [dry] cleaners," says George Waters, CEO of Camden, New Jersey-based EDTEC Inc., which develops training materials on setting up youth-entrepreneurial programs. "Kids should understand how business and the economy works in their neighborhoods," he adds. Find a business mentor within your family or network of friends or check with professional organizations such as the National Association of Black Accountants, National Black MBA Association and National Black Chamber of Commerce.

* Create contractual/entrepreneurial opportunities. Instead of just giving your child a weekly allowance, pay them to do things around the house. Use this method to teach them about business. "Many times parents miss an opportunity to teach mini-lessons on entrepreneurship by using household chores," says EDTEC's president, Aaron Bocage. "There is a difference between saying to a child, `Go clean out the basement and I will give you a couple of dollars,'" he explains, "and saying, `I have some things that need to be done around the house; what is it worth to you to do them? Come back to me with an estimate.'" The latter comment is a business transaction where they are getting paid for their time and labor.

* Start a part-time business. Many people have a part-time business on the side. This is an ideal opportunity to have young people observe how a business operates. Involve your children in your entrepreneurial ventures, says Waters. He cites some examples of successful parent/child businesses: selling clothes retail, delivering newspapers, making silk flower arrangements and providing janitorial services.

* Support school-based programs. Know what is being taught at your child's school. Some teachers aren't aware of the materials their colleagues use to teach entrepreneurship in the classroom. Parents can share information with teachers about curricula like that developed by EDTEC. Teachers should also research how to integrate business concepts into such subjects as social studies, economics and math. Also, you can suggest activities, such as field trips, or afterschool programs, such as entrepreneurial clubs, to enhance the lesson plan.

NAIC Trustee Robert Wynn, a financial education officer for the Wisconsin Department of Financial Institutions, has partnered with the local school district to fund a summer youth-enterprise academy. The economics day camp targets urban high school students--mostly 10th graders--and teaches them the basics of business and stock ownership, as well as leadership skills. The program also develops youth investment clubs, taking the top five students from the summer camp. Funded by grants from foundations and private donors, student teams are given $10,000 of real money to invest until graduation, upon which they split the actual funds.

* Create a Youth Entreprise Center. Work with churches in your community to establish a Youth Enterprise Center. Churches have all of the necessary ingredients to serve as a youth-business incubator: office equipment, space, funds to provide micro- or macroloans, and a built-in customer base (the congregation). "Churches are ideal because they have the resources to train kids and support their businesses, without sustaining significant costs," says Bocage. "Most churches of any size have members with a background in accounting, law and teaching who can mentor [youth]."

Starting out, you may be exposing your children to the benefits of owning a piece of America. But learning about the stock market could open doors to a host of highly paid occupations on Wall Street and beyond. Understanding how companies work and how they earn profits could give your children insight into many career opportunities in such areas as law, accounting and business management.

Brandon Celestine isn't sure whether he wants to be a plastic surgeon or a stockbroker. One thing he does know is that knowledge is power and power creates wealth. "By investing, you learn not [only] to work for money, but [also] to make your money work for you," he explains. "Someday, I want to own enough shares of a company to be able to sit on the board of directors."

For more information on DOFE, go to to get a complete list of all 10 principles or call 877-WEALTHY to get your free Wealth Building Kit.


Use the charts above to help your child track the price of each stock in his/her portfolio over time. At the end of each calendar quarter--March 31, June 30, September 30 and December 31--find the share price and mark it with a dot. Draw a line from last quarter's price to the current quarter's price. Watch how the stock's price changes. Keep in mind though that price is just one measure of a company's performance.


[Charts OMITTED]


There are a number of resources to help children better understand business and money matters. Subscribe to newsletters such as Kidpreneurs News[TM] and Black Enterprise for Teens[TM] ( The latter focuses on economic and self-empowerment for ages 13 to 18, featuring profiles of young business owners plus money, management tips, while Kidpreneurs News seeks to foster the entrepreneurial spirit in children ages eight to 12, featuring profiles of historical African American entrepreneurs. Don't overlook parenting magazines such as Family Money (, which features articles on kids and money. better Investing is the NAIC's official magazine for individual investors.

In addition, scan the business and financial sections of your local newspaper and the Wall Street Journal with your children. Teach them to read the stock tables--don't be afraid of the numbers, it's just dollars and sense. Watch TV-business programs, such as CNN's Moneyline News Hour and CNBC's Market Wrap to hear what the pros are saying about the market and the economy. Other handy tools.


Nobody's Business But Your Own: A Business Start-Up Guide With Advice From Today's Most Successful Young Entrepreneurs by Carolyn M. Brown Hyperion, $14.95

The Lemonade Stand: How to Encourage the Entrepreneur in Your Child by Emmanuel Modu Gateway Publishers, $19.95

The Millionaire's Club: How to Start & Run Your Own Investment Club--and Make Your Money Grow by Carolyn M. Brown John Wiley & Sons, $19.95.

Making Money the Old-Fashioned Way: Over Two Hundred Years of African American Inspiration and Ingenuity by Aaron Bocage and George Waters EDTEC, $10.95


EDTEC Inc. 313 Market St. Camden, NJ 08102 800-963-9361; 609-963-8110 (fax)

EDTEC provides educational products and training. Its "New Youth Entrepreneur" is a soup-to-nuts series on starting a business, developed in conjunction with the Ewing Marion Kauffman Foundation.

BLACK ENTERPRISE Unlimited 130 Fifth Ave. New York, NY 10011 877-543-7736

B.E. Unlimited's Kidpreneurs Program is dedicated to the creation of business-education products for youth. The Kidpreneurs Konference is held in conjunction with the Black Enterprise/Bank of America Entrepreneurs Conference. For a $20 annual fee, youth can join the Kidpreneurs or Teenpreneurs club, which includes a subscription to the newsletters and premium gifts.

Kauffman Center for Entrepreneurial Leadership Inc. at the Ewing Marion Kauffman Foundation 4801 Rockhill Rd. Kansas City, MO 64110 816-932-1000

The philanthropic organization offers various services that train, educate and encourage entrepreneurs. It has several educational programs designed to introduce students grades kindergarten through college to entrepreneurial opportunities.

Junior Achievement 1 Education Way Colorado Springs, CO 80906 800-843-6395

The economic education organization teaches youth, grades K-12, about free enterprise, business and the workforce. Its Titan game, a free online business-simulation game, is the first in a new series of Internet-based products from JA and Lycos Inc. (
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Publication:Black Enterprise
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Date:Jun 1, 2000
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