Get Creative With Allowance And Raise Entrepreneurs

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I wouldn’t think that a website devoted to discussing internet startups would be the place to go to get some really great parenting advice, but this post from an internet entrepreneur makes a pretty good case for using an allowance as a tool to inculcate some business sense in your child. I have an economics degree, so I kind of love this story. Instead of getting paid allowance, this guy’s dad went out and rented him a vending machine and installed it in a local workshop. Then he told his son that if he wanted to make money each week, that meant he had to figure out how to run the machine, manage the inventory, and make pricing decisions:

I ran the machine for about 4 years from the time I was 7 or 8. At first, my only agency was inventory management. We drove to Costco in his big van and I decided what to buy. Stocking an empty soda machine is easy: you buy four cases of each soda you want to carry.

But then the Coca-Cola runs out first and the Sunkist is half empty and nobody has bought even a single Grape Soda and should I cut my margins paying more per-unit for individual cans or do I buy full cases and find somewhere to store the extras and why am I doing algebra on the weekend!?

Looking back on it, I’m certain this whole endeavour operated at a loss. Dad subsidised it like crazy so I would have a safe–but real–environment to learn in.

The post goes into a lot more detail about what the author learned about cash flow and other facts of economic life, which he now says have enhanced his understanding as an adult businessman. It’s well worth reading the whole thing. I did find this story interesting because, as it so happens, one of the most entrepreneurial people I know had a gumball machine business with his father when he was younger. He spent weekends as a teenager driving around Western Michigan extracting money from machines in the entryways of Arby’s restaurants. It doesn’t seem like the ideal way for a teenager to spend his weekends, but the experience obviously imparted some good business sense.

I don’t suppose we can all afford to rent our kids their own vending machines, but this story makes a compelling argument in favor of finding creative ways to make allowance a learning experience rather than a handout.