The Project
I wanted my kids (12 and 10 years old) to have an entrepreneurial mindset - be financially literate, understand the world of business, and have the right attitude. I documented my journey step by step using what I learnt to upskill myself and to teach them.
Objective
I want my kids to
- Be financially literate (in addition to what they learn in school)
- Understand the world of business.
- Have an Entrepreneurial Mindset.
Read more on what I mean by Entrepreneurial Mindset in children.
As part of this, I needed to identify the skillset that kids need... and find a way to teach and train them in a constructive environment.
The main objective is to learn complex topics in a simple and easily understandable manner... gradually, one topic at a time, every day.
One new topic each day.
Build knowledge slowly and gradually to lay a strong foundation.
I wanted to start with the basic accounting principles. So I started with bookkeeping - not just teaching, but making the kids do the actual bookkeeping.
I also needed to learn, train & upskill myself in a multitude of aspects - to teach and train my kids.
Before Starting Project
Be clear with the below before starting the project.
- Explain the basic concepts of Accounting. And set the context around bookkeeping. We will do bookkeeping to gradually learn the terms and business concepts as we start recording transactions in bookkeeping software.
- Set up a bookkeeping software - I use Xero. [Read more on What is Bookkeeping? What Bookkeeping softwares are available?]
- Kids should have access to their own email accounts
- Discuss the salary structure. Yes, be clear about how much the kids will get paid for their work. We started with a non-paid training period of two weeks.
- Identify the optimum working hours per week that the kids will be able to commit. How many hours will they work? how many days in a week? We started with a trial of 4 hours per week.
- Identify a workspace in the house. We sit next to each other when working so we can see each other's screens.
- A challenge that we as parents need to be able to manage is teaching kids who learn at different paces. How do I manage kids learning at different paces? Plan your sessions accordingly.
- Set rules on how we record the working times. Identify a template for Time Sheet (a timesheet is a way to record the time spent on tasks by a person) - how does the timesheet look like? What will be documented in the timesheet? how often does the timesheet need to be updated?
- Identify a mechanism to share files internally within the team - we use OneDrive. Yes, now the kids and I are a team!
Getting Started with Bookkeeping
I wanted the kids to start bookkeeping - I believe this will give kids an insight into the basics of accounting.
- Day 1 - Basic training on Expenses vs revenue vs profit: What are expenses in accounting? Refer to An Introduction to Expenses in Booking
- Day 2 - Setup of Xero for Bookkeeping: Inviting Access for Xero only for invoices
- Day 3 - Creating the first expense in Xero - Entering SquareSpace domain renewal invoice in Xero. We learnt quite a few things:
- What are the data captured in an invoice (e.g. issue date, description, addressed to, etc)
- What is GST? What is GST Inclusive vs GST Exclusive?
- Not all terms will be clearly labelled. Sometimes, we have to infer them.
- How does the total of the invoice change if we set tax-inclusive vs. tax-exclusive in Xero?
- Day 4 - We needed practice. So we recorded 6 SquareSpace Invoices in Xero (base currency in AUD), and recorded 1 Atlassian Invoice (base currency in USD). This is to introduce the concept of paying in a currency different to the invoice. We learnt:
- Invoice Currency Vs Base Currency
- Currency Exchange Rates & daily fluctuations
- Transaction charges levied by the bank for transacting in different currencies
- Day 5 - Basics of reconciliation in Xero. We learnt about:
- Reconciling an expense recorded in AUD against the bank transaction in AUD.
- Reconciling an expense recorded in a different currency (USD) against the bank transaction in AUD.
- Currency Exchange Rates
- Bank charges when paying in a different currency
- Day 6 - Ash (12) recorded eight invoices and Adh (10) recorded two invoices in Xero. We got into complex invoices. We need to keep recording in Xero for practice.
- Day 7 - Recording Expense Bills to Pay with multiple line items
- Day 8 - Recording a Refund Transaction in Xero
- Day 9 - Record more transactions in Xero
- Day 10 - Again, record more transactions in Xero. I wanted the kids to see multiple different types of invoices so they could see the companies I interacted with.
- Day 11 - Trust and Holding Company Structure
- This was a complex topic - it took us 2.5 hours to go through this. We went through the Family Trust, Family Investment Trust, Holding Company, Operating Companies... and concepts in Trademarks and de-risking.
- Day 12 - What is Accounting? Accounting Basics: Key Terms and Concepts. We covered the following topics:
- Accounting Basics
- Who is an Accountant?
- Do we need to be Accountants to start a business?
- As a business owner, can we do the accounting ourselves?
- Key Accounting Terms
- Cost vs Price
- Revenue, Expense & Profit/Loss
- Asset, Liability and Equity
- Tax Terms
- Key Financial Reports
- Income Sheet
- Balance Sheet
- Profit and Loss Statement
- Cashflow Statement
- Bank Reconciliation
- Accounting Basics
- Day 13 - What is Investing? Why invest?
- Day 14 - Two activities were done:
- Recap on the following topics:
- Record Expenses in Xero - we recorded around 30 invoices today.
- Day 15 - Record more invoices.
- Now, the focus is - are the kids able to continue working for 2 hours in a stretch
- Day 16 -
Upcoming Topics - yet to learn:
- What is Revenue/Sales?
- How do we record Revenue/Sales in Xero?
- What is Profit?
- How does a company pay Tax?
- What is a Holding Company?
- What is a Trust?
- Investing in Properties
- Investing in ETFs
- Buy ETFs on CommSec
- Reinvesting dividends from ETF investments - ISHARES S&P 500 ETF on Computershare