The Lemonade Stand: Teach Your Child How to Make Money

Can you really use the lemonade stand to teach your child how to make money?  Can you really give them a leg up over a Harvard MBA?

Q:  Really?
A:  Yes.

Q:  How?
A:  Read on.

(In the prior post, we mentioned that we follow some unwritten script for success that, for many, provides insufficient information to make the right career decision. We at justmakingcents.com (JMC) believe that a better way is to do, and to do early and often — what we call “deliberate discovery.”  This is Part 1 of a 3 part series.  Read Part 2 here and Part 3 here.)

Here’s the background of the incoming class at Harvard Business School

Industry Students %
Consulting 143 15%
Consumer Products 62 7%
Energy/Extractive Materials 65 7%
Financial Services 104 11%
Gov’t, Education, & Non-Profit 72 8%
Health Care/Biotech 61 6%
High Tech/Communications 137 15%
Industrial/Heavy Manufacturing 50 5%
Military 51 5%
Other Services 58 6%
Venture Capital/Private Equity 139 15%
Total 942 100%

Take a second and look closely at the chart. Do you see any category missing?  

Business Owner/Entrepreneur.

Why is that?  It’s because successful business owners and entrepreneurs don’t need an MBA. In fact, many of these incoming students are there to buy (Literally. Tuition is $200,000+. Add in opportunity cost with 2 years of non-work, the number can exceed $350,000) the knowledge and skills that an entrepreneur already has obtained from experience.*  Here’s how you can give your child a leg up on these students in 1 hour with less than $20:

The lemonade stand.

Stay with me here. How much “business” juice can I squeeze out of a lemonade stand?  As you will see, lots. Even if you’re not the one selling the lemonade, you might find this information helpful as a primer on business. Every successful entrepreneur had to learn the lessons below. 

Babysitting vs. Lemonade Stand

It’s better for your child to start with a lemonade stand than babysitting. Babysitting is a service business where time = money, meaning that how much your child makes only depends on how many hours he/she works (same for consulting jobs). Thus it rates high on responsibility, but low in terms of teaching business lessons. 

By contrast, the lemonade stand is as simple as it comes, but carries the complexity of most products-based businesses–researching, planning, launching, working capital, inventory management, manufacturing, selling, optimizing, accounting, and capitalizing. Thus, it rates low on responsibility, but very high in terms of teaching business lessons. 

Selling lemonade could be just selling lemonade (how most people see it), or it can be an amazing teacher (how I hope you’ll see it after reading this post). The key is to properly structure the approach, spot the business lessons, and teach properly when these lessons arise (usually it’s when your child doesn’t know what to do next). 

I recommend the lemonade stand for children ages 5+.

Some Suggestions Before You Get Started:  

  1. Don’t push them to do it. Ask them if they’re interested in “having fun by selling lemonade and earning money.”  It needs to feel like their choice and something they want to do or the lesson won’t work as well. If they don’t want to do it this week, maybe next week. Maybe next year. Don’t force it. 
  2. To the greatest extent that you can, be hands off. This needs to feel like your child’s venture. You’re here as their mentor and helper.
  3. Let them decide what they want to do with the proceeds.
  4. They sell lemonade at least 3 times.

Lesson 1: Researching and Planning

Casey wants to do it. The very first, important lesson comes immediately:  Research and planning. Casey has an idea, but how does it go from idea to product?  

Research and planning: I’ve purposely left out a lemonade recipe because that’s your chance to teach your child how to acquire knowledge. It could be from a cookbook or the internet–that’s beside the point. What’s important is that your child understands the process of researching. I suggest a recipe that heats the sugar in water first so the sugar syrup mixes in easily with the lemon juice. I also suggest buying in amounts that yield more than 20 cups. 

Now that Casey has the recipe, they make a list of what and how many of each item to buy. Casey’s mom helps out with the big words on the list since Casey is still learning how to write. The list includes the following:

  • Lemons/lemon juice
  • Sugar
  • Dispenser/pitcher
  • Ladle (Dispensers tend to get clogged if there’s pulp, and the pitcher is too heavy for Casey to lift)
  • Cups
  • Sign
  • Table
  • Small binder clip
  • Sunscreen
  • $19 (This is important. The first sale is usually a moment of euphoria. To make sure the first customer doesn’t walk away because Casey could not break a $20, Casey’s mom is prepared with change).

At this point, Casey has an information gap: she knows what to get, but doesn’t know how much. Casey and her mom guestimate. (You may face a little whininess or discouragement at this phase because this may be the first time they’ve thought or worked this way. Keep it light, encouraging, and fun. It’s like making a craft project). 

Casey and her mom discuss the best day to shop, make, and sell. Then they determine the location and time to sell (I suggest somewhere close–you’ll see why in lesson 3). Casey circles that date on the family calendar.

Lesson 2:  Working Capital and Capitalizing

Casey and her mom are ready to shop. Casey encounters the next lesson:  she has a working capital problem. In order to make money selling lemonade, she has to buy the lemons, sugar, and cups. Her birthday money isn’t enough. How does she (and, similarly, your average business owner) solve this problem?

Casey’s mom asks how she’ll pay for it. “I don’t know.”  Casey’s mom explains how capitalizing solves this problem through something called “lending” or “investing.”  This is what her mom says:

  • Lending:  If Mommy lends you the money, that means you pay Mommy back the amount she gives you. So if Mommy gives you $10 to buy your ingredients, and you make $16, you pay Mommy back $10 and keep the $6. But, if you make $30, you still only give Mommy $10 and you keep the rest, which is $20 (30-10). Mommy is giving you a loan.
  • Investing:  If Mommy invests in your lemonade stand, Mommy takes half of what you make. So if Mommy gives you $10 to buy your ingredients, and you make $30, that means you give Mommy half, which is $15 and you keep the other $15. So Mommy makes $5 on her investment because she gave you $10 and you gave her back $15. But, if you make $16, you give Mommy half, which is $8, less than what Mommy paid for to buy ingredients and you keep the other $8. Mommy is investing in your lemonade stand.

Loathe to give up any equity, she chooses the loan. They shop for the ingredients during the weekly grocery run. They ask for a separate receipt to keep track of expenses. 

Lesson 3:  Producing and Launching the Lemonade Stand

Time to manufacture the product. Her mom starts the stopwatch on her phone to time how long it takes to make a batch. Casey’s little hands wring as much juice as they can. Her mom squeezes out the remaining juice. They make the sugar solution together. (Hopefully your children get a little disgusted seeing how much sugar goes into “sweet” drinks like mine did.)

For the sign, Casey writes a simple message on a standard piece of paper:  Lemonade $1. She then decorates the sign with little happy faces. (I suggest $1 to keep the math simple for your child, although older children might want to try selling at $2 a cup)  

Casey’s mom asks if she would like pay $1 to do the kitchen clean-up. Casey starts to see that she can outsource work in exchange for $.

Important:  Without her knowing, a few days before the launch date, Casey’s mom emails and texts her neighbors and Casey’s neighborhood friends about the lemonade stand, then follows-up the morning of launch. She understands that since this was Casey’s first experience with starting a business, it is vital that there are at least some customers so that Casey is encouraged and wants to do it again. In addition to the $19, Casey’s mom has $10 on her in case she needs to step in and buy at the end (see Lesson 4).

Lesson 4:  Overcoming Fear, Launching, and Selling

Casey is ready to launch her business. This is a big day. Since this is the first time, Casey’s mom monitors Casey’s mood. She knows that nervousness can manifest as whininess or hyperactivity. She checks in with Casey to see if she’s feeling a little scared. Casey admits that she’s scared of rejection, that no one will buy her lemonade or, if they do, that it will taste bad. Casey’s mom is relaxed and shows confidence in Casey. Casey looks to her mom (and her body language) for guidance and reassurance.  

Important:  This feeling of fear will never go away, regardless of whether it’s the first time selling lemonade or 100th time launching a product. Casey’s mom co-opts that fear and nervousness by reminding Casey that this is actually a good feeling, and that that feeling is there to help her focus. 

They’re on site. Casey’s neighbors and friends, reminded by Casey’s mom that morning, suddenly develop an insatiable thirst that compels them to walk the land in search of a sweet, tart drink. 

Casey’s mom clips the sign in front of Casey’s chest on her shirt collar, using the small binder clip. (If you couldn’t tell, Casey’s mom is a marketing whiz. She knows that a sign above the head or under the table makes a nicer display, but is less effective. If the sign is above Casey’s head or below, then people look at the sign and many will walk on by. However, Casey’s mom knows that humans are programmed to look at signs–they just feel the need to read them. By strategically clipping it under the chin, people will be forced to look at her child’s cute face. That makes it harder to turn away.)  

Tip:  If no one has come by after 5 minutes, you become the first customer. The time between opening for business and the first paying customer can be the most nerve-wracking time for your child. The longer it goes without a sale, the more it will reinforce his or her fears about rejection. However, if your child makes a sale, and it’s from a friendly stranger–often times they are if they’re buying from a lemonade stand–chances are, your child will light up inside.

Casey’s mom wants to coach Casey on what to say or do. She doesn’t want her child to be discouraged when there’s a lull between customers, but she wisely abstains (other than the first customer), giving Casey space to figure it out and resolve those feelings. Casey is already over-whelmed in the moment that over-coaching may actually may hinder learning. Casey’s mom uses this time to observe, enjoy the moment, and take lots of pictures!

(Do keep an eye on how much has sold. One trick is to know how many cups have been stacked and count down.)

Important:  Casey’s mom wonders, “if sell-through is not at a brisk pace, how long should you stick with it?”  She senses Casey is at the end although only half of the dispenser remains. She suggests that Casey give it 5 more minutes then pack it up, but caps the entire time to sell at 2 hours. She sees that Casey hasn’t made a profit yet (using the cup trick), in those last 5 minutes, she says, “I’m really thirsty and would like to buy you and me a cup of lemonade for doing such a great job!”  Two minutes later, she buys another round and then offers a tip. Profit, finally.

Lesson 5:  Accounting, Inventory, and Review

It’s now time to count the beans.

Casey and her mom create a simple profit and loss statement. Casey counts the money to figure out sales and use the receipt to figure out cost.

Sales:      $

– Cost:     $______

= Profit:   $

Next, they take inventory of what they have left: how many cups, lemons, etc. are leftover for the next sale date.

This next step is vital. Casey’s mom asks 2 questions:

  1. What did we do well?
  2. What could we do better next time?

This is one of the most important things they do, because it celebrates the wins but emphasizes the process. It creates a habit of reviewing to improve.

For the first go with the lemonade stand, one “what did we do well?” answer should be “starting.”  Starting is one of the hardest things to do and should be a reason to celebrate. 

For “do better,” one thing could be the time it took to make the lemonade, so perhaps Casey’s mom can make the syrup while Casey squeezes instead of waiting to start after they’ve been squeezed. Another one could be that Casey had to handle the money too much, so she might want to have a money jar.

Casey’s mom makes sure that the tone of this time isn’t critical but constructive, so for every “how could we do better?” she has 2- 3 “did wells.”

Your child learned a lot. More than you and I did at that age (or even at 3 times that age). Your child took the first, big step to becoming a successful entrepreneur if he or she chooses. They won’t need an MBA. If they want an MBA, they can just hire one– MBAs can learn a lot from them!

(P.S. I’m taking part in the Money Making Madness Linky hosted by Charlotte Burns from Lotty Earns, Emma Bradley from Mum’s Savvy Savings, Emma Drew from EmmaDrew.Info and Lynn from Mrs Mummy Penny!)

Next:  Part 2 — what to do with that money


*They are also there to buy the network or entrance into certain fields that won’t allow you through the gates without one, like private equity. For career changers or someone trying to up-tier their career path, the MBA is excellent.


FREE Guide to Help Your Child Start Making Money Download

Reading about helping your child start a business is a good start, but the real learning and habit formation starts by doing.  I’ve found it helpful to have a quick, easy-to-understand guide.  Just fill in the form below, then click “Download” and I’ll send you the FREE guide!

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