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The Ultimate Teen Money Hack for Parents

The BiggerPockets Money Podcast
30 min read
The Ultimate Teen Money Hack for Parents

You’ve heard of money hacks before, but probably not like this. For the teenagers and parents of teenagers listening, this episode will give you everything you need to make yourself, or your child, financially successful, straight out of high school. Most parents think that a strong financial foundation is built through allowances, debit cards, and making their child get an after-school job. While none of that is bad advice, it doesn’t leave the teenager with a sense of financial security or knowledge of how to manage money.

Thankfully, the Sheek Freak himself, Dan Sheeks, is back on the show to give his “ultimate teen money hack for parents.” This strategy has been built through years of teaching children how to manage and make money and is one of the easiest ways to get teens on the correct financial path. This isn’t an overcomplicated strategy, but it will take some buy-in from your teen. What they’ll get out of it is far more independence, responsibility, and the ability to save and invest for a better future.

But Dan isn’t the only guest on today’s episode! We also have Carl Jensen and Claire Jensen joining us! Claire is fifteen years old, putting her in the perfect position to take ownership of her finances. She also asks some insightful questions your teen might ask when you try out this strategy. Thankfully, Claire is a fan of Dan’s system, and she encourages all the parents (and teens) out there to try it too!

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Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome to the BiggerPockets Money Podcast show number 330, Finance Friday Edition, where we interview Dan Sheeks, my daughter, Claire Jensen, and talk about the ultimate teen money hack for parents.

Dan:
The authorized user on a credit card is an amazing hack to start the teenager with a good credit score before they turn 18, having money conversations involving them and paying the household bills before the strategy we’ve talked about today is implemented. They should be involved with some of the decisions for the household budget. They should be clicking the mouse to pay the bills every month. Talk to them about budgeting. Have them start tracking their income and expenses, even if it’s as a teenager not a lot of money’s coming in and out.

Mindy:
Hello, hello, hello. My name is Mindy Jensen, and today is a family affair, plus Dan. My husband Carl is here today. You know him from 1500days.com and from the Mile High Fi Podcast.

Carl:
Woohoo. Thank you so much for having me.

Mindy:
That sounds weird.

Carl:
It’s early. My brain is not working yet. I don’t know what to say. I’m lost for words.

Dan:
I think it was perfect, Carl.

Carl:
Thank you, Dan. One person appreciates me. Claire, what did you think of my intro?

Claire:
I think that this is going fabulously so far.

Mindy:
It gets better, I swear, and also sitting beside me is my lovely 15-year-old daughter, Claire Jensen.

Claire:
Hi.

Mindy:
Carl and I are here to make financial independence less scary, less just for somebody else to introduce you to every money story because we truly believe financial freedom is attainable for everyone no matter when or where you are starting.

Carl:
Scott is not here, that rhymes, so I get to read the next part. Whether you want to retire early and travel the world, go on to make big time investments and assets like real estate, start your own business or teach your children how to handle their finances, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams and more dinosaurs. I like dinosaurs.

Mindy:
Okay. Today’s episode is for you and your teen. Dan Sheeks is the teen authority, the author of First To A Million: A Teenager’s Guide To Achieving Early Financial Freedom, and he recently spoke at Camp FI Rocky Mountain, which is a weekend retreat that travels around the country for like-minded people where there are several speakers over the weekend. Dan’s talk was about teaching your teen about money, and it blew me away. I instantly thought two things. Number one, I want to do this with my kids, and number two, I want to get Dan on the show to talk about this method. So Dan Sheeks, welcome back to the BiggerPockets Money Podcast.

Dan:
Great to be back. Thanks for having me. I can’t do a Carl Jensen intro, but I’ll do my best.

Mindy:
Well, you don’t have that dinosaur thing going on.

Carl:
You have to really work at it to sound as bad as me, Dan.

Dan:
I’ll keep practicing.

Mindy:
So Dan, when you were giving your talk at Camp FI, I poked Carl and I said, “I want to do this with Claire. I want to do this with our kids.” Daphne is 12. I think she’s a little too young for this. Why don’t you share your concept, a high level and then we’ll get into it a little bit deeper?

Dan:
Yeah. The high level version, I call the method the ultimate teen money hack for parents, meaning that this is something parents can use with their teenagers, and it’s, I think, the best way to introduce your children to money, how it works, how to handle it, how to be responsible with money while they’re still in your household, so they’re still under your supervision, under your control, you can monitor the situation. So then when they leave your house, they are good to go. They understand money. They’re responsible. They have good habits set in place versus what everyone else does, including pretty much everybody I know. The teen graduates from high school, they go off to college or elsewhere, and then they start learning how to handle their money as an adult, and things don’t always go well, should we say. So this is a strategy to help eliminate those problems.

Carl:
Dan, where were you 25 years ago or how long ago was I in college? A long time ago, but I came out of college with $60,000 in debt, and lot that was credit card debt, not a lot, but over 10,000. So Dan, if we could just go back time-

Dan:
Same.

Carl:
… after you’re done with this, if you could invent a time machine, we’ll go back and then you can set me right. I’d be far better off right now. Dan, how about you?

Dan:
I was the same way. I graduated college with lots of student loan debt and continued to rack up more, by the way. I’m working on that time machine, and if I can make it work, not only will I not take out student loans, I’ll be buying lots and lots of real estate back in my 20s. I wish I could do that.

Carl:
I will invest in that syndication deal.

Mindy:
Okay. So Dan, how does your system work?

Dan:
Yeah. So to get into the nuts and bolts, I won’t go into every single detail. I will say this, at the end, if there are parents listening or people who know someone who might be interested in a detailed PDF, I’ll give them my email address and people can shoot me email and I have something I can send them. So this is a way to get your teenagers in a place where they’re responsible and they’re comfortable and they’re confident with money before they leave your household.
So you’re basically going to give them full responsibility of their finances while they’re still in your house, and it’s almost full responsibility. I would say 90% because they are still teenagers and they still probably do need some supervision and definitely some training. So the plan is completely adjustable, customizable. So as I lay it out here today, everyone should just keep in mind that you can make tweaks. You can make changes. You can do things differently. You can change as you go through it. It doesn’t have to be exactly the way I lay it out right now.
To begin, the best idea is to start tracking the spending that you as a parent do or the money you spend on your child, everything from food, clothing, school expenses, insurance, their part of the cellphone bill, everything that you spend on your child. Now, that might be eyeopening, and that might be surprising if you start adding up all the money, but it also includes annual costs. So if they go to a summer camp or once a year if they have some other expense, that should be included in the tracking.
So the goal is, as a parent, to have a very, not exact, but a very good idea of how much money do I actually spend on, let’s say in this case, Claire, in a given year because what you’re going to do then is divide that by 12, and you’re going to give your teenager a stipend, a monthly stipend that they then use to pay their expenses, and we’ll get into how that works.
One of the other ways to prepare is that I would definitely have a savings account and a checking account set up for your teenager. If they’re under 18, then that would be a joint account, which is super easy to do. If they’re 18, you could just have them open up their own account, but you might want to help them do that. So they’re going to have their own checking and savings account.
Once you figure out how much that monthly stipend, and by the way, I don’t like to call it a stipend. I like to call the paycheck because the idea here is that you’re training them that they are going to once a month get this paycheck direct deposited into their checking account, and what that looks like is that the parent just transfers the money into their checking account let’s say on the first of the month every month. You can do it twice a month too if you want and just divide it by two. So they’re going to get their “paycheck” deposited into their checking account, and then they are responsible for budgeting that money to pay all their bills throughout the month.
A lot of those bills they pay are simply going to be them transferring back to their parents the money for let’s say food, cellphone bill, health insurance, possibly rent, if you want to throw that in there too. So that’s what it looks like in a nutshell.
Now, I’ve seen it done different ways where some parents will say to their teen, “You’re going to pay for all of your expenses except for housing.” So maybe they don’t charge them rent or, “You’re going to pay for all your expenses, except we will still pay for any food you eat in the house, but any food you eat at school or at a restaurant, even if you’re out with us at a restaurant, that’s going to be coming out of your account,” but again, it’s flexible. You can do it however you want.
So they are responsible for paying all of their bills. If they’d happen to have a part-time job where they have some other source of income or a different revenue stream and you know they make $200 a month from their part-time job, then you should include that in the calculation of how much their monthly stipend slash paycheck should be because I think it’s even more powerful when the teenager realizes that when they pay every bill, part of that money is money that they’ve earned, and it teaches them the value of the dollars. So if they do have a part-time job or some other source of revenue, then incorporate that into … Don’t just let them keep all that. Have them use some of that to pay their bills.
Then so every month they’re paying their share of the bills. They can use their debit card and their checking account to buy things on their own. If they go out to Chipotle or Jimmy John’s, debit card. They can transfer money back and forth to parents depending on the bills themselves. Now, as a parent myself, here’s some extra things I would throw into that. I would teach them that when that monthly paycheck comes in to their checking account from you, that they first pay themselves first.
So they get trained that if that, and let’s just make some easy numbers here, if that’s $1,000, that X percent of that is going to go into maybe their savings account for some future investments or their future self, right? So teach them to pay themselves first right out of the gate with this system. Teach them what a weekly expense looks like, monthly expense, yearly expense, and how they need to budget for that. So if the sports camp costs $1,000, they should be putting away X amount of dollars per month, so that when that expense comes up in let’s say July, that they have the money to pay for it. They need to plan ahead for that annual expenditure that might be a big number.
They should also create an emergency fund. Perhaps that’s a second savings account. They’re putting money into that until they have three to six months of their expenses saved up. They can think about long-term savings for family vacation or investing or giving. Do they want to donate any of this money? Then their own fun and entertainment, budgeting for that stuff. So they will be paying for everything.
If the family goes out to a restaurant, let’s say they go to Applebee’s and they’re sitting down. They’re separate checks, right? So the teenager is going to order items off the menu knowing that at the end of the meal, they’re going to pay for their check with their debit card and their parents aren’t going to cover it. This will create a situation where they start looking not just at the menu items, but the prices, and they’ll start asking themselves, “Is this $6 dessert worth it? Am I really willing to spend $6 because it’s mine, and if I don’t spend it, I get to keep that $6?” So it forces them, clothing, looking at, “Do I want the name brand clothing versus maybe something from a low-end store or even a secondhand store?”
They should pay their share of the utilities, their share of the cellphone bills, school supplies, toiletries. If they have a car, then they should be taking care of all their car expenses, the maintenance, the gas, the insurance. They pay for their haircuts, their gym membership, everything, but as a parent, you’re giving them enough money. The idea is that they’re not going to run out. You’re giving them enough money and you’re allowing them to teach themselves how to budget.
The last thing I’ll say as a parent, and this is maybe the most important is you have to be able to let them make mistakes. Don’t rescue them before the mistake. So if they spend more than that’s in their account, let them do that and feel what it’s like to pay a fee to the bank because they overdraw in their account. If they missed a payment and it’s late, and as a parent, you could have due dates for some of your bills, then they have to pay a surcharge for that late payment and let them feel what it feels like to have to pay an extra $20 because they forgot to pay it on time.
If they’re learning these lessons in the house before they’re out in the real world, and you as a parent can monitor and make sure everything is going well. Last thing I’ll say is that if they do run out of money, the idea is then that they’re not going to be able to buy the things they need. You as a parent, you could step in, and I recommend giving them a short-term loan. So maybe you loan them $500 with some interest, so they can feel how that works, so that they can pay their bills for that month, and then they need to budget for paying back that loan in the following months. So that’s the down and dirty idea and, yeah, if you have questions, we can go into it.

Mindy:
Oh, we have questions. I love this. The reason that I love this is because, like Carl said, when he turned 18, he went to college and it was just like, “Here you go. You turn them loose,” and what happens? You get on campus. I think they’ve changed this now, but we’re old. You get on campus and they’re like, “Hey, would you like a free T-shirt? Sign up for this credit card?” and now you’re in debt for tens of thousands of dollars for a free, stupid T-shirt that you don’t even wear. You sleep in it maybe or do you still have that T-shirt, Carl?

Carl:
No. I have the Frisbee, though.

Mindy:
Oh, okay. Sure. So you’ve mentioned debit card. One thing that the FI community really goes nuts over is credit cards and credit card points. Do you have any guidance on credit cards with points attached? I know because she’s 15 she can’t get a credit card. I know this because I tried to get a credit card for her because they sent her an application and they’re like, “Why did you fill this out? She can’t get one until she’s 18.” I’m like, “Well, you sent it to me.” So we might do a joint card with her as an authorized user. Do you have any comments on that?

Dan:
Yeah, do it. Absolutely. I didn’t mention that, but yes, you nailed it. If they’re under 18, then I would open up a credit card account. Technically, it’s in the name of the parent, but you add the teenager as an authorized user, and they’re the only ones that use it, right? So they get their own credit card with that account, with their name on it. They can use their credit card. They can start to see and learn what it feels like to build up points, and then also, and this is a bonus, a huge bonus, not many people know this, but even though they’re a minor at that point, most of the time, those credit card payments if they’re using it, those monthly hopefully on time credit card payments will build the minor’s credit score and credit history even though they’re not 18 yet, and then that will carry over into their adult life. So I think a credit card is a great way to go, but I would make sure it’s a separate account that the parent never uses, only the teenager.

Mindy:
Yeah, and an added bonus for that is because Carl and I have 800 plus credit scores, once she turns 18, our credit score, because she’s an authorized user on our card, transfers to her. So she’ll be 18 years old with an 800 credit score.

Dan:
It’s not as hard as you think to get a high credit score when you’re young. I have many members in my community that have done it in the first year to two years after turning 18. Their credit scores are in the upper 700s. Even though their history’s short, everything on the report, everything on their history is solid. They’re making on-time payments and they’re managing it well, but if you do make one mistake when you’re young, it has a much more significant hit to your score than an adult.

Carl:
There’s one thing I really, really like about this strategy, and I’ll back up a second. I talked a little bit about my big money mistake on episode 335 of BiggerPockets Money. Is that correct, Mindy?

Mindy:
Yes.

Carl:
Okay. Yeah. It was episode 335. After I had my first job, it wasn’t too long after that that the great recession came, and what I did is I stopped investing. So at the best possible time to invest money, the stock market was on sale, I freaked out and stopped, and that was a big mistake that’ll eventually cost me probably millions of dollars if I live long enough.
So the thing I really like about this, Dan, is this gives them an opportunity to make the mistake when it’s not going to be that bad. If you’re 15 and you get your stipend or payment on the first of the month and you go to the mall and go crazy and blow it all and you have to get a loan, that’s something that a lot of people might not learn until they’re in their 20s, but this is an opportunity to do it when you’re 15 or 16 or 14, and by the time you’re in the real world and a real functioning human adult, you’re going to be set. You’re going to have it figured out. Well, you might not have it completely figured out, but you’ll be in better shape than most.

Dan:
I agree, and I’ll add this to it. So Carl and Mindy, your two daughters, which I need to say this, by the way, we all got to hang out at Camp FI. I met Claire and Daphne and we hung out and they were great with my son, Callum. Your daughters and, Claire, don’t let this go to your head, but your daughters are amazing. They are super mature, well-rounded, awesome young women, and I mean this. If my son Callum turns out to be half as amazing as your daughters, I’ll be very, very happy. They’re awesome kids, and they have the benefit of having Carl and Mindy Jensen as parents.
So without a doubt, these two, you’re Claire, and I don’t want to talk about you, you’re here, Claire and Daphne are ready to implement this strategy. I don’t have any doubt, but I would say to other parents, don’t just throw your child into this as the only thing you ever have done. This needs to be preceded by many money conversations and other things that you do in your household, including them in the household bills and budget and stuff. I wouldn’t just do this out of the gate. This is, like I said, it’s the ultimate teen money hack. So it needs to be the finale of when they’re with you at home to before you send them out into the real world.

Carl:
I’ll make one other quick comment. The other thing I really like about this is not that my children do this, but if they decided they wanted to stay in the shower for an hour, they’re going to pay for that. They’re going to directly see the results, and I’m not quite sure how to meter her that, maybe a device on the shower-

Dan:
I don’t know either.

Carl:
… a timer like, “Claire, hit the timer when you start.” Claire, you don’t do this, but I know other people who have kids who this is an issue with and, “Sure, you could take that hour shower if you want, but guess what? You’re going to pay for it.”

Dan:
It’s an extra five bucks.

Carl:
Yup.

Claire:
A way to save money. I’ll just not shower. Does that work?

Mindy:
Ew. No.

Carl:
Okay. Now, we’re getting into super lean fire.

Claire:
Just kidding.

Dan:
Well, that brings up a good point because Claire just said she would just not shower, which isn’t really an option, but what you will find when your teenagers are going through this system is that they will start finding ways to be frugal that will, I think, impress you. So not showering every day hopefully isn’t one of those, but being more selective at a restaurant. I think if the parent does decide to not charge them, I don’t know if that’s the right word, for the food they eat in the household, it’s really difficult to estimate what the value of the food they eat in the household is because if you did, the teenager is just going to sneak down in the middle of the night, eat everything in your fridge, and then not tell you about it.
So usually, parents will just say, “Anything you eat in the house is free,” and if that’s the truth, then you might see your teenagers start packing a lunch for high school as they go to school instead of going out to lunch or eating in the cafeteria and paying because that saves them money. So you’ll start to see changes in the way they purchase things, fun things, clothes because they know that if they don’t spend that money, it’s theirs, they get to keep it, and that’s a different feeling than, “Mom and dad just buy everything I need, and I don’t get to keep anything left over.”

Mindy:
To be clear, the not showering thing was the joke. I’ve met her. That’s not going to happen, but, Claire, what questions do you have about this plan and what do you think of this plan?

Claire:
First off, I love it because I think it was probably when I was two, ever since I was two I wanted independence. So this is a fun way to experience it while also having it be preparation for the real world, which I think is fun. I don’t know. It feels like growing up in a FI family just feels like a really fun game because I’ve been prepared for the future my whole life.

Carl:
Claire, do we ever talk about money in our house?

Claire:
All day every day.

Carl:
Do you know what an index fund is, Claire?

Claire:
Yes.

Carl:
Do you know what the value of Tesla stock is or the current state of the S&P 500?

Claire:
Yeah, roughly.

Carl:
Good.

Dan:
She passed the quiz.

Carl:
Claire, do you have any questions for Dan or-

Claire:
So I have a couple questions. The first one is what happens if my parents want to go on a vacation because I went to Europe earlier this summer with my school trip and I had to pay for the whole thing or my portion of it because that was a trip that I chose to go on, but I feel like my parents usually choose to go on trips. So do I get allotted more money for that? Do I have to pay for it from my own allowance? Do we calculate that into the yearly fund? How does that work?

Dan:
Good question. So you’re talking about a vacation that the family is planning to go on.

Claire:
Yup.

Dan:
Yeah. So in my mind, this is how I would do it as a parent. I would set it up this way. I would say, “Claire, we are going to Disney World in June, and you’re going, but as you know, you are going to pay for your slice of that vacation, and we have built that into the stipend.” Most families don’t. They take a big vacation every year or it’s somewhat consistent. So Claire then, on that vacation, would pay for her own airfare, her slice of the hotel, her own admission ticket to Disney World, her souvenirs, her food in the park, and her bill in the restaurants that they go to.
If as a parent, and I think any discussions about money are advantageous. So if the Disney World vacation was going to be more expensive than the average, then I think the parent and teen should sit down and say, “All right. This is going to be way more expensive than what I was budgeting for or what we had thought about. So parents, I need a little extra money for this vacation. Can you give me a little extra in the next three or four months so I can save up for this vacation that’s more expensive than the average average one we take?”
The parents might come back and say, “Well, we’ll give you a little bit extra, but to earn more, I want to see some more chores around the house or some more clean up the backyard or something like that, and then we’ll pay you some extra money to help you afford your vacation to Disney World because you are going.”
At Camp FI, someone asked the same question, and there were teenagers there, and I think it was Sarah Grace who said, “Well, what if I just don’t want to go? What if I just say I don’t want to go to Disney World and I get to save all that money?” I mean, that’s not the point. Family vacations are important. So as a parent I would say, “Well, you’re going and you’re paying for your share,” but as you know, together have the conversation to find out what’s the best way to plan and budget and give them the money that they would need to actually pay for it.

Mindy:
I did think that was funny that they both had the same first question.

Dan:
I don’t know what that says about all teenagers that they would even consider not going on vacation with their family to save a couple thousand bucks, but it’s probably not a bad thought to have.

Claire:
FI kids, they’re a whole other brand. So I had another question that I thought of while you were talking about that. Do we still get paid for chores around the house?

Dan:
I think so. Yeah. Yes. Anything that you’re doing around the house that’s extra, I think, yes, you should get paid, but if the family’s doing an allowance, I think that would go away just like a set allowance no matter what because that would be part of the stipend or paycheck, if you will.

Carl:
Claire, I’ve got some big construction projects coming off, if you would like to learn how to tile or frame or even run electricity, I’m very safe. I’ve only shocked myself a couple times. You’ll be safe. You can earn extra money.

Claire:
Okay. First of all-

Carl:
How do you feel about that?

Claire:
… I would love to learn how to tile. Second of all, I’ve gotten electrocuted by my light switch before.

Mindy:
Shocked. Electrocuted is different.

Claire:
Shocked, whatever. I got shocked by my light switch.

Carl:
Yeah, that was my fault. I didn’t put the switch plate cover on on time.

Mindy:
Yeah. Just don’t touch the hot wires.

Claire:
Okay, great.

Mindy:
Okay. Back to the questions.

Claire:
Yeah. What happens if there’s money left over at the end of the month or year, however, whatever segment you’re paying it in? Do we just get to keep that and put it in our savings?

Dan:
Well, assuming, so when you say money left over, I’m going to assume that is money left over after you’ve put money away for what you know are your annual expenses. So if there’s a sports camp in the summer and it costs 500 bucks, you’re putting a little bit of money away every month so when that sports camp comes up, you have the money to pay for it. So if you have already allotted for all of your big annual expenses and there’s money left over, awesome, it’s yours. You as a teenager get to decide what you do with that money. It can go into savings. It can go into an investment. It can go into a new snowboard or a new video game or a really nice dinner out with your boyfriend, girlfriend. If there’s money left over, yeah, it’s yours. You get to do what you want with it.

Claire:
Cool. I like that plan.

Mindy:
It could go into your emergency fund so that you could continue to save for these big expenses.

Claire:
The amount of knowledge I have about an emergency fund, I could write a whole book.

Dan:
I will say my answer, I was assuming the emergency fund was already funded, yeah, you would want to get your emergency fund to a place where it’s set before you started spending extra money.

Claire:
Can the amount of money fluctuate each month? If we’re doing something that costs more like a sports camp, I know I go to camp every summer, so do we get allotted more money for that month to cover it?

Dan:
The idea is no, that the paycheck is the same every month because when you work for a company, unless you have some bonus or commission, your paycheck is the same every month. However, again, going back to what I said at the very beginning, this is customizable. It is adjustable. It is flexible. So if the parents and the teen agree that things are a little off, then absolutely it can change or there can be a one-time “bonus” for a month, summer bonus to cover some expenditures in the summer.
It’s not like all the decisions are made and then they’re done. The parents and the teen will be communicating hopefully often, weekly, if not more often than that, about how things are going. The parents can monitor the checking account because they have access to it. They can monitor the debit card. They can monitor the credit card. They can monitor the savings account, which they should do, and if changes need to be made, then talk about it, agree on it, and make those changes.

Mindy:
Ooh, Scott and I talked about having a money date with your spouse. I’m trying to find that episode. I can’t find it, but I think having a money date with your child where you go over once a month or maybe even over the first month, once a week you come in, “How’s it going with your spending? How is it going with your budgeting, and how do you feel about the amount of money that we gave you?” because I’m assuming you help guide them with budgeting. It isn’t just, “Hey, we listened to that Dan Sheeks and Claire Jensen episode, we’re going to do that. Here’s $1,000. Good luck.”
I’m assuming that if you’re planning on doing this, it’s because you love your children. You want to teach them about money. So you’re going to sit down and show them. I mean, you could show them how to track their spending by showing them my budget over at biggerpockets.com/Mindysbudget, where I am tracking my spending. Have you seen that?

Claire:
no.

Mindy:
Oh, okay. Well, you’ve heard me talk about it, right?

Claire:
Yeah.

Mindy:
Yeah, all the time, and having a way to track your spending so you can see where your money’s going. It’s one thing I think to have $1,000, and it’s quite another to be like, “Wait. I got $1,000 yesterday and now I have a 1.50 left. Where did that money go? Oh, I forgot. I had to pay mom rent, and I had to pay for my share of the utilities, and I had to pay all of these things. I don’t really have $1,000 a month. Now I have $300 that has to get me through the rest of the month.” So I think that would be really important. We’re going to talk about money more, Claire.

Claire:
Oh, great.

Carl:
One thing I’d like to do for Claire, just to get a quick question for me, is the investing portion. Once she has a job that has reportable income, I’d like her to open up a Roth IRA and I would like to match her contributions 100%. That’ll really help her get ahead in the future, and it’ll also incentivize her to really save. Hey, Claire. For every dollar you invest, I’m going to give you another dollar, an instant 100% return. What do you think about that, Dan?

Dan:
I think that’s great. I think that would be separate from this whole strategy. I think that would just be something where you say, “It’s not included in the monthly stipend paycheck. It’s not included in your expenses. It’s just something I want to do for you, but in the strategy, you need to save money to invest in that IRA, that Roth IRA so that I can match it,” and let them budget for that.

Claire:
Okay. Yeah. I love that. I love that plan.

Dan:
You love free money, right?

Claire:
Oh, yeah. It’s my favorite.

Carl:
Claire, do you have any other questions for Dan?

Claire:
Yeah, I had one last one. It’s smaller and it might be more of a personal thing. If we’re paying for the meal at the restaurant and then we get separate checks, do we also pay for the tip?

Mindy:
Mm-hmm. That’s your expense.

Claire:
No, I like that idea. I’m just clarifying.

Carl:
You’re clarifying.

Claire:
Knew you were going to say that.

Dan:
Oh, I like that one. That’s good. That’s a teacher joke. Nice one. Probably the 1,510th time Claire’s heard it, but first time I’ve heard that one. I like it.

Mindy:
Now every Claire student that Dan has is going to hear it.

Dan:
Yeah.

Mindy:
Okay. So Dan, at what age or level of maturity do you recommend parents start thinking about this ultimate teen money hack because I know my kid is 15. I probably could have started this with Claire when she was 14. She’s 15 and a half, actually, almost 16. I don’t know that Daphne is ready at 12 and a half. She’s in seventh grade. Claire’s in high school. Where do parents start thinking about this?

Dan:
I think it’s probably right about where Claire is. I think let’s start from the back end. If you know they’re going to move out of your house at let’s say age 18, I think a good length of time to run this strategy with them would be around a year to get through at least one full year. So I would think that the latest you’d probably want to do it is about a year before they graduate high school or right about there, so around age 17. The earlier you can start it, the better, but most teenagers are not Claire. To start them at 13, 14, 15 might be too early, but it really is a case-by-case basis.
Most people listening to this podcast who are parents probably are somewhat similar to the Jensen family, where they’re having money conversations with their teens, I hope. So that age could be lower. It could be around freshman in high school, but if the family’s just beginning to have money conversations, then you might wait a year or two. Again, like I said, the ultimate team money hack for parents isn’t something you just do out of the gate. It’s the finale. It’s the end of their journey with you learning about money. There’s other things you should be doing ahead of time to set them up for success in this strategy.

Mindy:
Awesome. Dan, are there any other suggestions or tips that you have for parents who are listening to this and are as blown away about it as I was when I heard you share it at Camp FI?

Dan:
I mean, I have dozens and dozens of tips for parents. Yeah. I could go on and on. I think one tip I would give parents is the book that I have, First To A Million, which is published by BiggerPockets. Thank you to BiggerPockets. It’s meant for the teenager, but as a parent, buy that book, read it yourself, and then give it to your teen and talk about all the different topics and strategies that are in the book, and then buy them the workbook and have them work through that. I wrote those things just for teenagers, and parents definitely need to be involved with that.
The authorized user on a credit card is an amazing hack to start the teenager with a good credit score before they turn 18. Having money conversations, involving them in paying the household bills before the strategy we’ve talked about today is implemented. They should be involved with some of the decisions for the household budget. They should be clicking the mouse to pay the bills every month. Talk to them about budgeting. Have them start tracking their income and expenses even if it’s as a teenager not a lot of money’s coming in and out, but have them use mint.com or some other free app to track their expenses and their income so they can see where their money’s going. There’s so many things. There’s so many things.

Carl:
Yeah. I’ll second your book, Dan. While I was reading that, I know it’s geared towards getting your kids’ finances together, but as I was reading your book, my thought was, “Wow. There’s a lot of adults who could really benefit from the knowledge in this too.” One of the things I liked about your book is it’s all encompassing. I would say you don’t go super deep. You’re not going to go into a simple path to wealth depth on why index funds are the right answer, but you cover it and you mention it. So your book is a great starting point for a lot of different topics.
The other thing I want to say about you, Dan, is I had the honor to go to your book launch party, and I met a lot of members of your tribe, the SheeksFreaks, and seen these young people who are 21 years old just inspired by you and killing it in life. So inspirational. These people who say, “I can’t do this,” look to the SheeksFreaks. You can do it and, Dan, you can point people to a lot of examples. Super cool.

Dan:
Speaking of which, we need to get Claire in the SheeksFreaks group.

Claire:
I just started reading the book and it is so good, but yeah, I would love to join the group.

Dan:
Awesome. Awesome.

Mindy:
Yeah. Thanks, Dan. She’s reading your book. She’s like, “This is amazing. I’m learning so much,” and Rachel Richards spoke at Camp FI and she’s like, “That was so great. I learned so much from Rachel.” I’m like, “Are you kidding me? You know I’ve been telling you all the same stuff, right?”

Dan:
Welcome to my life as a teacher. For those who don’t know, I’m a high school teacher and I will talk about certain things over and over and over in class, and then I’ll have a guest speaker come in and say the same thing and my students are like, “Why didn’t you ever tell us about that? That’s so awesome.” “I’ve told you 10 times.” It’s much like being a parent. Yes.

Mindy:
Claire, do you have any final thoughts about this?

Claire:
I can’t think of anything right now. I mean, I probably will as soon as we hit stop recording.

Mindy:
That’s how it goes.

Claire:
Yeah. I’m just honestly really excited.

Mindy:
Okay. Well, we’re going to try this for a couple of months and we’ll come back and check back in with you around November. So after you’ve done this for August and September and October, we’ll circle back. Dan, I’d love for you to join us again as well to check in with Claire and see how her spending and budgeting is going. Carl, you and I have some homework to do to figure out how much money we’re going to be giving Claire, and we’ve got a credit card to look into. Yeah, don’t get excited about that credit card, girl.

Claire:
I’m scared of credit cards to be honest.

Mindy:
Just don’t spend everything.

Claire:
I won’t.

Mindy:
Credit cards aren’t scary. Credit cards can be really a powerful tool if you use them right, and they can get you into a lot of trouble, but luckily, your bossy mom will be there to teach you how to use it right.

Claire:
I know.

Mindy:
Dad will be there too.

Dan:
If you don’t want, Claire, if you don’t want your parents telling you how to use your credit card, keep reading First To A Million and that will tell you exactly how to do it.

Claire:
Okay. Will do.

Mindy:
Okay. Dan, you mentioned that you would share your email address so people can reach out and get a PDF about this plan. Please tell people where they can find you.

Dan:
Yeah. So [email protected], and SheeksFreaks is S-H-E-E-K-S-F-R-E-A-K-S. I’m sure you’ll put that in the show notes. So if you’re a parent or if you know someone who has a teenager that would maybe be interested in this strategy, just send me an email and I have a PDF I can send you that goes over everything we talked about today and then a little bit more too.

Mindy:
Awesome. Dan, I really appreciate you inventing this idea. I really appreciate you sharing it at Camp FI. Shout out to Stephen Baughier, the founder of Camp FI, for bringing you there to introduce this to us. The beauty of this plan is the simplicity, and yeah, the beauty of this plan is the simplicity in it to teach your child how to handle their finances while they still have the safety net of living with you. I’m super excited to see what Claire does with it.

Dan:
I am too, and I’m excited to check back in. I need to do this. I should have said this at the beginning. A shout out to my buddy, Adam Carroll, who actually planted the seed for this strategy a few years ago on one of his Ted Talks, I think. By the way, parents of teenagers, I will pitch this for Adam, he has a documentary called Broke, Busted, and Disgusted, and it is about the student loan debt crisis in America that every parent and every teenager, frankly, should watch. Broke, Busted, and Disgusted, Google it. Yeah. So Adam Carroll is probably the founder of this idea. I definitely took it to the next level, but I want to give him credit.

Mindy:
From episode 330 of the BiggerPockets Money Podcast, we’ve been joined today by Dan Sheeks, Carl Jensen, and Claire Jensen. I am Mindy Jensen saying it’s all about the Benjamin’s baby.

 

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In This Episode We Cover

  • The “ultimate teen money hack” every parent should try with their high-schooler
  • Teen debit cards, credit cards, and building up basic frugality
  • Teaching your teen to “pay yourself first” through strategic spending and investing
  • Letting your child make mistakes now, so they don’t make life-long mistakes later
  • The perfect age to implement this strategy and when it matters most
  • Common questions your teen may ask and getting them excited about money management
  • And So Much More!

Links from the Show

Books Mentioned in This Episode

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.