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Teaching Financial Responsibility: The Early Teen Years (ages 13-15)

The fundamentals have been learned, the principles of financial responsibility have been internalized.  Now, these teens are ready to learn to manage money like an adult.

During the teens’ academic journey, in 10th grade they complete a Life Skills Course (see Raising Scholars: Spreading Wings) in which they read several books on finances and financial management. 

After completing this course, several changes occur in their lives and their finances to transition them to adulthood.  Age 16 is a good age to make this transition since the teens will still have two years of financial mentoring before heading off on their own.

What changes occur at age 16?

      • VEHICLE:

Since our teens began community college at age 16, all of them were taught to drive at age 15 and got their drivers’ licenses at age 16, primarily so they could drive themselves to their college classes and to their jobs. 

For each of them we purchased a reliable vehicle with low enough mileage they would be able to use it for many years. 

We as parents paid for auto insurance and gas for travel to campus and extracurricular activities.  They paid for gas for any other driving and for any increase in insurance premiums due to tickets or accidents. 

      • CHECKING ACCOUNT, DEBIT CARD, CHECKS:

The previous divisions of money were eliminated and all their money was deposited into their savings account. 

From this, we discussed how much money an “adult” would need available for necessary purchases such as gas, community college expenses, unexpected small emergencies.  Our teens decided on $200. 

This money was used to set up a checking account with a debit card and checks. 

Teens had to keep receipts for all deposits, debits, and expenses.  These were used to balance their bank statements once a month.

Every month when the bank statements arrived in the mail (during this training stage, we used paper statements), they would sit down with the statements, receipts, and check record.  They were taught how to balance their bank statements, accounting for all their income and expenses. 

Any educational expenses or other “essential” expenses were reimbursable.  The teens had to present a list of expenses for which they were requesting reimbursement along with associated receipts.  Only expenses with receipts were reimbursed.  This process was to teach them the process of requesting reimbursement from a boss or other organization.  

The teens were also taught to write checks.  Though checks are used infrequently these days, they still needed to know how to write a check.  

      • “CONVENIENCE” CARD (AKA CREDIT CARD):

After the teens had learned how to manage a checking account and debit card and balance their bank statements (usually 3-4 months), a cash-rewards credit card would be set up for them to use. 

We would discuss the benefits of a credit card in terms of earning cash back, localizing expenses in one place, and building credit score.  We would also discuss the pitfalls such as overspending, destroyed credit, and ruinous debt. 

We emphasized many many times that they should never spend more than they would spend in cash, and they must pay off the bill in full and on time every month.  The credit card was not a vehicle for spending more than they have or on anything they would not purchase with cash ~ it was a convenience only.

If at any point they mismanaged the convenience card, they would lose the opportunity to use it.  They understood being allowed to use a credit card was a privilege and a unique opportunity to start building their credit score.

      • INVESTMENTS ~ INDEX FUNDS:

A general index fund in the stock market was also established. 

We discussed the power of compound interest and the benefits of starting early, investing just a small amount on a regular basis in stable index funds with the purpose of long-term investment and growth.  We would go through many examples to make this concept visual. 

We would then discuss the amount they wanted to invest and look through the various index fund options to identify a good growth fund.  

Many options are available for index funds.  We used Vanguard and Fidelity due to the low fees.

After the teens are able to competently manage their savings account, checking account, check register, debit card, convenience/credit card, and index fund investments with paper statements, they are taught how to access and manage their finances online.  Frequent monitoring of their online accounts helps catch and intercept any suspicious activity.  

Through these financial experiences and responsibilities we were not only able to teach our teens how to manage their finances like adults but were also able to mentor them through any problems they encountered. 

Hopefully, by the time they left home, they had a solid understanding of responsible financial management and had a head start on their savings and beginning investments.

NEXT: Teaching Financial Responsibility: Mentoring Adult Children (ages 18 and beyond)