• A lemonade stand can teach your child about income and expenses. 
• Lemonade stands can also help your kids learn valuable skills for their future careers, like doing market research on salary offers.
• Once your child earns a profit, they can start building good habits by conscientiously spending, saving, or donating their money. 

Do you want to teach your child about budgeting? A lemonade stand can be a great way to teach your children about income, expenses, investments, saving, and charitable giving. 

Here are the ways a lemonade stand will help them learn these lessons. 

Budget for Your Upfront Investment

It takes money to make money, so your child will need an upfront investment to start a lemonade stand. This is the capital required to purchase supplies, including ingredients, paper cups, and potentially a table and signage if you don’t already have them or can’t make them yourself.

If your child doesn’t have a big enough budget for this upfront investment, they can explore ways to earn the extra money they need to start their business. We do this all the time as adults, whether we’re picking up extra shifts at work or starting a side hustle to make ends meet.

Your child can also research ways to bring costs down. For example, they could borrow a table from a neighbor or buy supplies on sale.

Do Market Research

When you’re looking for a job, it’s important to research what other people in similar positions earn. That way, you are prepared for the interview and know what salary range to propose based on your skills and industry.

Your child can start practicing these skills with their lemonade stand. If there are other stands in the neighborhood, your child could research how much they charge to ensure their prices are competitive. 

If there are no competitors in your area, your child can ask friends and neighbors what they would be willing to pay before setting the price.

Calculating Gross Profit vs. Net Profit

After a hard day’s work, your child can count their earnings. The total amount they made will be their gross profit. However, they can practice calculating net profit by subtracting the amount of money they spent on supplies.

Understanding net profit is important for when your child receives their first paycheck. The gross pay is the amount their employer will pay them before taxes. However, when they receive their pay stub, they’ll see that FICA, income, and local taxes get subtracted from the gross pay. The amount that actually gets deposited into their bank account is their net pay.

Decide How to Allocate Your Income

When your child makes a profit with their lemonade stand, the next step is to have them think about what they want to do with their earnings. 

When you teach young children about money, you can give them three options:

• Spend the money
• Save the money
• Donate the money

Just like you don’t use your income to only pay your rent or buy groceries, your child doesn’t have to allocate their profits to a single category. They can save some, give some, and use a little to splurge on a treat.

Bottom Line

A lemonade stand is a cost-effective, enjoyable, and straightforward way to give your child hands-on experience with money.

Through learning about overhead costs and upfront investments, they will also understand the basics of entrepreneurship. Also, understanding net and gross pay will help them when they enter the workforce and receive their first paycheck. 

Leading by example is also an excellent way to teach your children about money. As you budget and work towards your saving goals¹, include your kids in the process by showing them your saving goals and progress in the Payactiv app.

¹Goal-based saving is a set-aside account, and you will not receive interest or other earnings on the funds within the goal-based account.

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