Setting Up Your Teen’s Financial Success

One of the main things I admire about Scott Pape is his passion to teach young people about money management and giving these young minds that knowledge CAN help their parents, teachers AND themselves for the rest of their lives.

Canna Campbell mentions in her book ‘Mindful Money’ that her dad intervened when she started working to make her set up a bank account and invest her money in shares. He went on to explain dividends and how money makes money. How powerful is that? I sometimes think I may talk too much about money with the kids but then I read something like this and know that I am doing my kids a service for their future selves when money does become a main part of their lives.

I would like to deep dive into what I have played with to help my kids get started with their finances, especially when they started working and bringing in their own CASH.

One of the greatest gifts you can give your kids is to prepare them to be responsible empowered adults around money”

The VALUE of money

To understand that each hour they work can be calculated into something that they want to buy. We went through examples of how many hours they need to work to purchase xyz. Say they earned $13/hr and a pair of Nikes cost $180, they would need to work 13 hours to earn enough to pay for them. Some items they still wanted to purchase, however it made them reconsider and make sure they REALLY wanted it.

Money Management

Getting paid, at any age, is an awesome moment. If you are not careful it can all go pffffttt in the blink of any eye, so before it can go pffffttt, I encouraged them to THINK about what they want in the short, medium and long term. In their language: 1 week, 1 month, 6 months.

  • Things to ask them:-
  • What are any BIG items you want to purchase in the next few months? New phone, car, schoolies week (end of school holiday with friends), gifts, etc. We worked out how much each one of these categories needed to be fully funded and came up with a percentage for each payday to transfer to these accounts.
    • For example:
      • Splurge/Social – 20%
      • New phone – 20%
      • Car – 20%
      • Schoolies – 10%

The accounts had a description like PHONE 2k, CAR 4k. This gives a visual of the target amount. We currently use ING however I have been trialling the features on UP Bank as the visuals is really good. You can set targets for different goals and assign money to each goal and watch the bar move towards the end goal. When my youngest can get a debit card, we will get the UP Bank one and then show my older one if they want to move too.

ING accounts for teenagers

Once the account had reached its total, then they could decide if they still really wanted that purchase, go buy it and change out that account description for the next thing to save for OR with the 20% no longer needed for the phone, that could now pile onto the CAR account if that was the next goal to get moving.

If they had a SPLURGE/Social account that was dedicated to guilt-free spending on whatever they wanted. They would know they are saving for bigger purchases AND also for FUTURE YOU. This has helped keep boundaries on how much they spend on different categories but also the freedom to purchase when they want. I would like to note that this concept is for ALL ages. My SPLURGE account is my saviour for both myself and my husband. Scott Pape talks about this in his Barefoot Investor books.


We added another thread to the learning after seeing them save for the phone and keep up the splitting of their pay. We promised that whatever they save for the CAR account we would MATCH it! We knew that a good second-hand car would be around 7-10k so if they saved 4k we would match at the end so they could look for a car around the 7-8k!

Now the BIG one….. FUTURE YOU

This whole process came with a caveat that the last remaining section, which is the MOST important is that they must always put aside at least 20% of their income for their FUTURE YOU account. The only time they could deviate from this was if they were at the end of a big goal (like a car) and they needed to add as much as possible to get over the line. However, in normal day to day savings, 20% must go into this account. I have changed this a bit for my youngest teenager who at present has only just started working and doesn’t have much on the ‘wish’ list so… FUTURE YOU gets 50% for now. I reckon, like my eldest, in about a year or so the youngest will start thinking of ‘wants’ so the FUTURE YOU will go down to the minimum of 20%.

FUTURE YOU account had a Description FUTURE ME $500

What we have discussed is that when this account gets to $500, we would transfer to their SHARES account to purchase ETF/LICs/Shares. This led us to the discussion about shares, investing and long-term investing. Compounding was brought up but their eyes glazed over so will have to wait for that conversation.

SHARE Purchases – They move the $500 to the brokerage account so that I purchase shares for them. They understand that this is a 10+ year goal.

I have set up ‘in trust’ accounts for each child so that when they turn 18 the shares will revert to their name without any capital gains. The risk is that they then have the authority to sell if they wish. We will have to hope that the knowledge I have tried to impart to them will make them think twice. At the end of the day, it’s their money and they can do as they wish. I hope they hold and keep building. 🙂

In my next post, I will go into the ‘what’ I do with their FUTURE YOU money and how I process with the brokerage account.

If you’d like more info on kids and money, see an earlier post here.

Backup for Mum and Dad

This section relates to my plan to have backup money to help our kids ONLY when we see that they are helping themselves. With the example of the car, we have said that if they save $5,000 in that account, we will price match. It gives them an incentive to save and allows them to purchase a better car BUT not a handout from us. This same technique has been discussed for even bigger purchases like an investment/home. If they save $50,000 then we will match. WOW … in order to be able to match we need to have a plan in place that does not impact our life savings for our retirement. So one of the things I did a few years ago is set up a BOND for each child. The $50,000 may be a huge stretch but at least we will try. If we are able I want to support our adult kids financially as much as we can however NOT to the detriment of our retirement phase OR to spoil them too much. There is a balance and I am still navigating that challenge.

We started an investment bond with AMP in 2014 that has a 10 year minimum hold on it. This aggressive BOND is in our name so we decide when/how we use it. Our intention with this is to have money available to SAVE MATCH with the kids for the really BIG items. Note to YOUNGER me…. should have started when they were babies so that I could use this for matching the car purchase.

The beauty of Investment BONDS

  1. Can’t touch for 10 years
  2. You don’t have to declare each year on tax returns as the BOND handles all that each year
  3. You can keep adding to the BOND with no fees but there is a rule that you cannot add more than 25% from the year before. So if you add $100 a month or say $1000 a year, you can’t add more than $1125 the following year. It can be a pain if you fluctuate each year but if you set up an automatic transfer each month then you know how much you’ll contribute, or at birthdays/Christmas you could put in a fixed amount .

Understanding the share market and different ways in investing, I could possibly have set these up different (ie, ETF or LICs with DSSP option) however I do see that this strategy was a good way to completely set and forget and not have to declare each year in tax, with the added benefit that you can’t touch for 10 years (without penalties). Now I know there is management fees and possibly other options however I have found that this is a real ‘set and forget’ strategy which works for me. Can be aggressive and you can have separate BONDS for each child.

Our kids know that we have money invested for them and that it is not automatically going to them (we set them up under our name). The stories that the FP told us at the time of kids going a little gahgah when they got a hold of the BOND that their parents or grandparents gave them was frightening. Until you know your kid has their ‘sensible head’ on it’s more peaceful for you to have in your name and it doesn’t stuff up your tax returns.

Stay tuned for the next post when I delve into the FUTURE YOU accounts for each child and what I do with the money each time they reach $500.

As always, you DO you 🙂