enterpriseforkids.com

Inspiring kids to be entrepreneurial.

Plan to Buy Gold and Silver!

October 11th, 2012

“Failing to plan is planning to fail!” Robert Kiyosaki

 

Most people have a plan on how to make their money, but they do not have a plan on what to do with their money when they make it. Kiyosaki points out that often these are the same people who will have a problem with not having enough money.

He also explains that if you have a good plan before you earn it, then your problem will be having too much money! …Now I like that problem!

Kids need an education on how to plan what to do with their money when they earn it.

Kiyosaki goes on to say,

“Poor people don’t have a plan. All they do is earn more money and spend it on bigger liabilities that take more money from their pockets and then they have to earn even more money. Therefore, despite what they earn, they are always short of money.”

The solution is to plan to spend earned money on Assets (things that appreciate over time) to make passive income. Don’t buy liabilities (things that depreciate and lose money over time) with earned income. Then use some of your passive income from the assets you own to buy the liabilities you want.

Our own kids are all busy planning their enterprises and are successfully making themselves money. They have plans to buy liabilities such as nerf guns, Ipods, computers and so forth, but no plan to buy assets. So I thought it was time to have a conversation with my kids about having a plan to buy assets.

We wrote an article about our conversations with the kids about Assets and Liabilities.  Here is a link to that article.

Once “Assets” as opposed to “Liabilities” was explained to the kids they were then able to make a plan to buy assets. In the above mentioned article I gave several suggestions of Assets that kids could buy. I would like to elaborate further on why Gold and Silver is an excellent asset that our kids could buy with their earned money.

Gold Coin from Lydia

Subscribers to this blog would have seen the promotion of a Gold and Silver Seminar that we hosted here in Bunbury a few weeks back. Our presenter, Andrew Smith, a mining engineer, investor and businessman, has been intimately involved with the world of Gold and Silver mining for many years. He gave many excellent reasons why Gold and Silver is well worth considering as a long term asset investment. I’ll now explain some of those reasons.

Gold and Silver is recognised world wide as money and can be used to buy products and services just as fiat currencies can. The first gold coin was around in 600BC in Lydia, Asia. The difference being, currencies devalue whilst gold and silver hold their value.

Andrew invented the “Meat Pie Indicator” to show why this is!

Aussie Gold 2012 Coin

Let’s see if you can get your head around this explanation of how the Meat Pie Indicator works!!

Back in 1970 you could buy a meat pie for 40c and today the same pie would cost you $4.50. Andrew explains that this indicator shows the Aussie dollar devaluing 350% over a period of 42 years (ie you need 350% more cash to buy the same pie).

What is interesting, is that if you had bought the meat pie with 40c worth of silver back in 1970 when silver was less than $2 an ounce, you would have needed one fifth of an ounce. Yet if you bought the same meat pie today using silver (at $35 an ounce) you would only require about one eighth of an ounce of silver. Silver has increased in value by more than 400% during the same period!
This is a terrific example of the Dollar devaluing due to inflation, whilst Silver (& Gold) gains in value! And no it isn’t just the Aussie Dollar that has devalued! All world currencies have! What’s worse, is that hyperinflation in certain countries have caused their currency to become absolutely worthless. Take Zimbabwe for example. Interestingly though, the people of Zimbabwe are now using gold to buy and sell goods.

If you are interested in understanding more about Hyperinflation and how it could even happen to us down under, then have a look at these videos…
Hyperinflation Nation Part 1

Hyperinflation Nation Part 2

Hyperinflation Nation Part 3

“Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man” Ronald Reagan 1980

As you can see, having precious metals is a hedge against inflation and devaluing currencies. Although this in its self is a very good reason to own gold and silver, there are also many more reasons.

Reserve Banks around the world are injecting more and more money into their economies. This money is being created out of thin air! Every time this occurs it dilutes the money supply and makes it more expensive to buy goods and services. It creates inflation, which in turn reduces the buying power of the dollar. What also happens is that more money is needed to buy gold and silver!

It is estimated that there is 80,000 tons of gold in the ground (in the World) and we currently mine 2500 tons a year. At the current rate of mining there is less than 30 years of gold left in the ground. Silver is running out even faster with only 20 years of silver mining remaining. I guess you can see that with gold and silver running out and the ever growing world requiring more and more of it, then you would expect their values to increase.

Indian Bridal Jewellery

What’s more, the Indians and Chinese love buying gold and silver, and as they become wealthier, so will their thirst for these metals. There are 2.6 billion Chinese and Indians. Much of the gold is bought as jewellery during the Hindu wedding season and during the Chinese New Year celebrations. It is estimated that there is 18,000 tons of gold jewellery present in India alone today. That is a huge amount considering that 165,000 tons have been mined world wide to date!

The commercial demand for silver in manufacturing products such as mobile phones, solar panels and mirrors means that the silver used with producing such products is not stored, but used up. This demand has been increasing year by year.

Since 2001 the USD gold price has increased by 500%.

Gold from $300/ounce in 2001 to $1750 today

Silver from $4 an ounce in 2001 to $34 today

As you can see fundamentally owning gold and silver for the longer term looks to be very promising. So why not introduce your kids to buying this asset class with some of their earned money, or rather than giving them cash for birthday presents, give them silver!

Perth Mint

It is very easy to do. The Perth Mint buys and sells gold, silver and platinum. All you need to do is walk in and buy it. Gold at $1750/ounce may be out of their league, but silver at $34/ounce is manageable. They can buy coins or bullion. Bullion will be better value for money, as coins are looked upon as collectables and have an additional cost for minting which greatly inflates the cost to buy the silver.

Our kids now have new goals. There goals are broken up into three parts and they have a plan for each. A part for buying liabilities, a part for buying assets and a part for tithing!

This website is worth a look at if you are keen to further your education on Gold and Silver.

$20 Piggy Bank! Click Picture

Cathy and I and a group of our friends are very excited to be heading up to Perth to learn from another Great Master. His name is David Wood and his event will be awesome!  So I guess our next blog article will be about what we learn from him!


Ways Children Can Make Money! Amber’s Enterprise Continued…

September 20th, 2012

There are hundreds of ways children can make money! Yet when chatting to parents they often tell me that they would really like their kids to have a little business enterprise of their own, but they just can’t think of a good idea.

Well here’s the tip… think what the problems or needs that your local community has and maybe a kids’ enterprise could be built around it. Another angle to come from is to consider what skill your child might have that they could put to good use and build an enterprise around that.

Brainstorm ideas by jotting them down on paper. Keep going until you have exhausted all possible ideas whether or not you intend to use them or not. Try asking the neighbours what issues and problems that they have and add these to your list.

Generally people have ‘time’ issues and that is where a business can be started from. Not enough time to mow the lawn, clean the large rubbish bins, chop the wood, tend to the kids’ homework, clean the windows, rake the leaves, tutor the kids, pull the weeds, clean the car… you get the picture!

If you are still stumped for ways children can make money, then check back through this blog as it’s full of ideas.

Amber’s “New From Old” enterprise has been going great guns right from the beginning. Her money jars are filling up, and really she hasn’t had to do much work at all! She reached her goal that she set a while back and she is now preparing to take her business to another level (we’ll talk more about that in a later blog).

If you are new to our blog and haven’t yet had the chance to follow what Amber’s Enterprise entails, then click the link on the left side bar that says “Enterprising Howitt Family”. Here you will be able to read about all the Howitt Kids and their entrepreneurial journeys.

Toddler ride-on toys

Amber will make the fortnightly trip to the local Recycling and Waste Recovery Centre. It sells anything salvageable. The guy who runs the place now knows Amber and understands that she is running her own business. Amber has developed important skills of negotiating and connecting with a network.  When she identifies an opportunity she will confidently strike up a deal with the Recycle Man.

Much of the stuff for sale is really not worth the effort to resell and profit from. It is like looking for a gold nugget in amongst the boulders. Amber’s ability to pick profitable items has improved over the months and she now has an eye for a bargain.

Pet Cage

The items that can be resold are the ones that generally solve people’s problems (eg pet cages, baby toys, storage and exercise). These items need to be well presented and in good condition. So Amber looks for opportunities that don’t require spending lots of time and money fixing them up. Ideally she buys things that just need a good clean, a lick of paint or a new set of batteries.  She has learnt from her mistakes to check the items properly before buying them. She did buy a perfect condition four man tent still in its new box for $10, only to find out later that it had no pegs or poles. To buy pegs and poles new would blow her costs out and she would run at a loss. So it was put down to a learning experience. Does anyone have free pegs and poles??)

Fish aquarium

Sometimes Amber will see a possible opportunity, but holds off buying it until she has done her research.  She will work out what it will cost to repair or tidy it up (paint brushes, varnish, batteries, sand paper, labour, etc) and then she will look at what others are selling it for on Gumtree (Classifieds online). By doing her research, she then has an idea of how much she can pay for it in order to make a reasonable profit.

Amber sells almost all her items on Buy and Sell Bunbury Face Book. She set up her own Face Book page for the sole purpose to be able to participate in the buy and sell market. She writes her own ads, uploads her own pictures and converses with customers online and on the telephone. When a buyer arrives she will present her goods to them and collect payment.

Amber placing her adverts onto Buy & Sell Facebook with the gang watching on!

We’ve watched Amber continuously grow in confidence with her enterprise. She understands the many different ways children can make money and has found and built her own business around solving problems and using her skills of creativity and communicating with people.

Some of the items that Amber acquired and on-sold for profit can be seen in the pictures on this blog.

The five outdoor toddler toys were bought for a good price. She scrubbed them, put new batteries in one, charged the battery in another and sold them all for $60.

The aquarium and pet cages just needed a clean and she made a profit of $25.

Display shelves

Her corner display required screwing together and she made a profit of $20.

Her current project is a very large timber outdoor table. She paid $10 and hopes to sell that for a profit as well after sanding it back and varnishing it.

Amber has also been collecting succulent plants from friends. Her plan is to paint decorative ceramic pots and plant hardy succulents in them, then sell them at a market day.

Here is a video clip of Amber reflecting on her business and goals from several weeks ago. She talks about how her business is progressing, what she needs to do to attain her goal, buying assets and gifting money. Make sure you take a look by clicking here!

It will be very interesting to see where her entrepreneurial journey takes her as she grows older. She loves writing, so maybe she will write a book about her journey!

Amber making a sale!

Hopefully in this blog we have helped show some ways children can make money through enterprise. If you have any good ideas or tips for our subscribers, please leave a comment below.

In our next article we will talk about kids buying Gold!


enterpriseforkids.com

Inspiring kids to be entrepreneurial.