Teens & Finances

[the_mother_thing]

I'm curious what other parents of teens/young adults do, use, etc. to help teach your kids about financial responsibilities, money management, banking, etc. One of the recurring discussions my DD & I have is how she felt high school did not adequately prepare her/other students for real life 'adulting', and one the main areas she noted was about money ... specifically, how to balance a checkbook, manage a checking account, etc. Of course, I work with her on these things, but also feel there are some things my bank could do to help me help her in this regard.

I currently have my DD's account linked to mine so I can transfer funds quickly/easily, monitor her spending as well as duplicate or unauthorized transactions, etc. But there are some 'gaps' in services that would go even further in helping me help her. What tools or helpful functionality did you use/does your bank offer in this area? What do you feel are things that would be more helpful in teaching your kids to manage their money in prep for adulthood?

And in the interest of transparency, my purpose for asking is two-fold: 1) I'm interested in learning about what other tools/options I can personally consider leveraging in helping my DD; and, 2) I work in the financial services industry, and might want to make some suggestions for specifically how we might help our customers help their teens/young adults with strategies & tools they can leverage. I have a list of ideas already, but curious what others feel would be helpful to them.

 

[chrono]

I pay my bills weekly and get DS involved so he can see incoming money - bills = what's left. We just started so we'll see how it goes. Hopefully, he'll understand that some are basics (mortgage, utilities, taxes) and some are extras (eating out, fun money) and how to balance that based on incoming money.

 

[Puppmom]

Hi, my daughter is now 22 and lives on her own. She didn't have a bank account until she was 15 and we monitored it closely until she left for college. I should have done more to *teach* her but live and learn.

We bank with USAA and it's entirely online. If there are brick and mortar - they're not in my area. They had a few handy services for youth accounts that are linked to a parent account.

- you can set a budget/spending limit and receive a text alert if your child exceeds.
- you can easily transfer money between accounts on the app. Great for allowance or when you're at the mall and they want something (if they don't have a bank card).
- the budgeting tool helps too - there's nothing like a good old fashioned pie chart to help you see where you're spending (wasting) money.

A few other things we focused on besides what you've already mentioned:

- ATM fees - teach them what a ripoff they are. And remind them that if your bank charges (as opposed to the ATM itself) it won't be on your ATM slip.
- no overdraft protection. Many banks (including USAA) will let you have automatic overdraft from your child's account into yours. Um, not happening.
- don't lend them money. My daughter would ask to borrow money for something she wanted in the form of basically a paycheck advance. Then the obvious would happen when she received her paycheck and I "took half of it". If you do lend money it certainly could be a good lesson if you're willing to deal with the hassle.
- equate items that want to purchase into days or hours worked. Those shoes are three days pay etc. It would be nice if a banking app had this type of easy equation built in.

ETA - this may sound a little aggressive but if you have an older teen working and eligible to participate in a retirement plan encourage them to save. The statistics about saving early are pretty convincing. The earlier you start the less of your income you have to give up to savings.

 

[Elizabeth35]

My sons got checking accounts with debit cards when they got their first regular jobs at 16.
I have been very open with them about all things financial-from retirement savings to shopping for insurance to housing costs.
This includes defining wants and defining needs.

I think almost everyone can benefit from comparing cost of your want versus your hourly pay.


One thing that I found pretty illuminating for my sons was showing them my pay stub. Then we discussed what I earned versus what came home. They saw the cost of health insurance, taxes, and that I maxed out my 401K. This led to a discussion of the power of regular saving and investing. Maybe not everyone is comfortable with this and my kids were late teens and I was a single Mom.
I think the visual helped them understand quite a bit.

I agree with not loaning them money and also not having overdraft protection. I did not monitor how they spent their paychecks. I didn't see any huge red flags and I would rather they make some relatively small mistakes at 16-17 than to have me hovering over their purchases. If they wanted to buy expensive shoes and be broke until their next check--their choice.

I have friends who are still micromanaging adult kids finances in their late 20's. I have no interest in doing this.

 

[Elizabeth35]

Forgot to add--we also had very clear understanding of what parents paid for and what they paid for.
We paid for car insurance provided they had good grades. We bought basic clothing twice a year.
Their responsibility was dating/entertainment money, eating out, gifts and any luxury type clothing items.
Our understandings were in line with their friends family's so it was really easy.

 

[mom2dolls]

This thread comes at a perfect time for our family! I have two daughters, 16 and 14 years old. My 16 year old will start working in a few weeks over spring break at my husbands company.
We will open her first bank account with the money earned. I want her to start learning how to manage money, as she is the child that receives $5 and wants to go to Starbucks.
My husband and I have started the conversation of what to have her pay for as a way to learn financial responsibility. She does not have her license yet, and will not have a car of her own for a while. I like the idea of luxury clothing and entertainment expenses.
When I was in high school, we were offered a life skills class. I took it as a senior, it was the best class! Taught me how to balance a checkbook, manage money etc.

 

[Dancing Fire]

Pay off your CC every month.
Max out your IRAs if you can.
Pay all your bills on time to built up your FICO score.

DD #1 is a very good saver. After she got her first real job (then live at home for 1 yr.) she managed to save over $30K which was 50% of the d/p for her house. I'll give you guys one good guess of who put up the other 50%...

 

[TooPatient]

Forgot to add--we also had very clear understanding of what parents paid for and what they paid for.
We paid for car insurance provided they had good grades. We bought basic clothing twice a year.
Their responsibility was dating/entertainment money, eating out, gifts and any luxury type clothing items.
Our understandings were in line with their friends family's so it was really easy.

This can be tricky if you live in an area where parents pay for everything. iPad, iPhone, name brand everything, lots of everything, parties for friends, new car...

If you pay for too much, they don't get much from the learning. Too little, and you are mean because none of their friends have to pay for that.

(I think it is an awesome approach! Just stating some challenges we are facing with a 17 year old)

 

[TooPatient]

Things a bank could do:

NO OVERDRAFT -- let them buy a coffee and have it decline.

Tricky and not sure it could be done with the regulations, but don't make the parent be on the account. That means that any overdrafts or accounts closed due to long term negative balance hit the parent on credit score too.

Have a picture showing how much goes to each type of thing (food/drink, clothing stores, etc) so they can see just how much those little things add up to.


Things parents can do:

NO loans. I really want to do this, can you give me a loan is a great opening to discuss credit cards and other debt. When is needed, how to use wisely, when is bad. (Brakes out in car is a must fix. Stuff on sale at Forever21 is a want.)

Encourage looking at bigger things. Set a goal to save for. Maybe a great new laptop or game system or whatever. (Great practice for car, house, retirement!)

Have them look at what it costs to live in different areas (and what jobs look like there too).
Have them find specific items and see what it will cost to move out. (Electricity deposit, silverware, toilet paper, everything)
Keep it going to what a monthly budget would look like.

 

[Elizabeth35]

Forgot to add--we also had very clear understanding of what parents paid for and what they paid for.
We paid for car insurance provided they had good grades. We bought basic clothing twice a year.
Their responsibility was dating/entertainment money, eating out, gifts and any luxury type clothing items.
Our understandings were in line with their friends family's so it was really easy.

This can be tricky if you live in an area where parents pay for everything. iPad, iPhone, name brand everything, lots of everything, parties for friends, new car...

If you pay for too much, they don't get much from the learning. Too little, and you are mean because none of their friends have to pay for that.

(I think it is an awesome approach! Just stating some challenges we are facing with a 17 year old)

Oh wow--that would be rough! I have to say we live in the Midwest and were in an upper middle class suburb of Chicago.
Not an uber wealthy area, but what I would call "new money". Yes-there were some very indulged kids and some very flashy parents.
Maybe I was just lucky that my kids chose to hang out with kids from families that expected teens to work?

But even very wealthy people frequently expect their kids to work and want to give them the life skills they need.
Warren Buffet is a billionaire and he feels you should never give your kids so much that they don't have to work.
I guess every family is different. But I would personally feel remiss if I didn't try to teach my kids about financial matters and impart a work ethic.

I would also point out that in my experience--teens can be unrealistic when it comes to saying that EVERYONE gets more than they do.
i also see that my experience with my teens 15 years ago is worlds different than now with my step kids.
The focus on stuff and expensive items is so much more prevalent. Social media really does a number on teens who want to fit in.
I was appalled when stepson sort of whined about a boy in his HS who had 80+ pairs of Nike shoes.
Seriously?

 

[TooPatient]

Elizabeth -- I agree! It can be crazy. We feel strongly about learning to work, save, budget, and plan so are teaching regardless of what others get.

Yeah, she does tend to find the spoiled friends. I know what they get as parents talk to me so confirm what I hear. I was thinking she must be exaggerating or just seeing what she wanted. People are shocked when I say we won't be doing _______ for her. (Really, it isn't the end of the world if we don't buy her a car! Especially since she and I attend the same college and take classes at similar times!)