Thinking Like an Entrepreneur Involves Understanding Money

One of my favorite ways to start a class is to ask students to get up, grab a dry-erase marker, and write all over the classroom whiteboards any and all questions they have about money. Nothing is taboo and nothing is off-topic: they can ask about wealth building, credit cards, taxes, get-rich-quick-schemes, the stock market, cryptocurrency, and student loans. 

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After a few minutes, the whiteboards fill up with a range of questions that showcase not only the innate curiosity of the students around money but also their lack of understanding of how money works. Don’t worry–this newsletter is not an angry diatribe against an educational system that spends more time helping students understand the periodic table of elements than it does helping them strategically invest over time to earn compound interest. Instead, this newsletter is about the four biggest concepts our students need to understand about money before graduating.

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And these concepts are inherent in the entrepreneurial mindset–when we combine growth mindset, grit, redefining failure, and opportunity seeking, with a keen understanding of how money works, the results are powerful. So here they are:

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Concept ONE - create a revenue stream. Many of our students fixate on how to SPEND money without first understanding that first they must EARN money. While it used to be common for students to have their first “real job” by age 16, now many students don’t get a job until graduating college, and therefore have no hands-on experience with how one goes about “earning money”--the idea of creating value (often in the form of time) in exchange for money is only abstract until that first paycheck arrives.

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Concept TWO - have a spending plan. Notice that I have avoided the word “budget”--a spending plan allocates the resources available to spend and the manner in which those resources can be spent–it also highlights the simple but undeniably important concept that we cannot allow more money to go out than is coming in. And this involves talking to students about credit cards. Even our best and brightest students don’t necessarily understand how credit cards work.

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Concept THREE - have an investing plan. I detest savings accounts - money left in a savings account long term only depreciates in value. Instead, if we explain the concept of investing (long-term and in buy and hold diversified strategies) to our students, we give them the ability to start building wealth the second they start earning money. Every student who has earned income should have a Roth IRA–the time to start is now. 

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Concept FOUR - the compound effect. Core to the entrepreneurial mindset is understanding the powerful principle “consistency compounds.” What we do every day, day after day, becomes who we are as a person–the same is true for our money. When we save and invest, as part of a long-term plan, compound interest becomes the primary engine of growth and it grows based on the amount of time the money is invested. This means the earlier our students start, the better.

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In the end, our students WANT to understand how money works and they ENGAGE in conversations around this in real-time. This is one of the reasons why entrepreneurial mindset education, rooted in understanding value and the compound effect, is life-changing for so many students.

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Connect with me to start this at your school.

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