Parents have so many important things to teach their kids: how to scramble eggs, how to do laundry, how to ride the T. Each lesson learned is a milestone moving them closer to independence. It’s the best kind of planned obsolescence I know. The milestone at my house this fall has been to teach our 16-year-old triplets Lily, Max, and Sam to use and manage their own bank accounts.
Relatives have been giving the kids money for holidays and birthdays for years. OK, so it’s really my dad who is the biggest culprit. From the time the kids were in elementary school, he began sending substantial amounts of money…in ones. The year they turned 10, for instance, he sent them each one hundred dollars, bundled, all in singles. You can imagine their uncontainable excitement. ALL three of them! ALL that money!!!
Mark and I were were deeply suspicious of the effects of these grandfatherly gifts. To combat the potential to spoil the kids rotten, we put into place a system that has covered gifts as well as allowance. The kids get 1/3 of the money to spend as they choose, put 1/3 of the money in a savings account, and give 1/3 of the money to an organization or cause they think will benefit from their donations. And then they write a thank you note to Grampa Jack. We told them they could touch their savings but once a year, at the time of their birthday. If there was something they really really really wanted, they could take out money and spend. Otherwise, once the birthday month had passed, the savings money stayed put for another calendar year.
To our surprise, the kids often saved more than they spent (and some kids saved more than others). We were also surprised to see that there was a nutty brilliance to my father’s madness. Handling large sums of money in ones gave the kids a concrete idea of how much money $100 (or $200 or…) was. And we also saw a sweet bond grow between the kids and my dad, who seemed to understand something essential about a kids’ eye view of finance.
Despite all these pluses, the system became unwieldy to manage. Over time, Lily, Max, and Sam came to have a lot of cash lying around. Mark was the only one who could access the savings accounts, so the kids couldn’t deposit, plus he forgot to put money in for savings and donations, and we lost track easily of what belonged where.
My solution, given the kids’ 16th birthday this fall? Open each of them checking and savings accounts at our bank. Give the kids debit cards and checks to put them in charge. Mark was initially reluctant. What if they blew all their money? What if they lost their cards? What if what if what if? He finally agreed that it was better to let the kids try to manage while they are young and at home and under our eagle eyes than to dump this on them as they are leaving for whatever comes after high school.
I brought home bank literature describing various kinds of accounts. There was no way they were going to read all that fine print. So I typed up a summary and emailed it. At the top, I wrote: PLEASE READ THE FOLLOWING CAREFULLY! THERE WILL BE A QUIZ! I explained the following terms: minimum balance, fees, bouncing, balancing, delays, checking vs. saving, debit cards, and checks. That seemed to cover the basics.
Yesterday, before we all went down to the bank, I delivered the quiz. The kids actually took it seriously. They prepped. They even sweated a little. I asked for a banking definition of the verb “to balance” as well as the noun “a balance.” Also questioned them about the relationship between delays and bouncing. All were able to give correct answers, some of which were excellent. For instance, question #1 was “What is a bank account?” I thought I’d start pretty low to the ground. Max had an especially strong answer:
A bank account is a place where you can put money in a safe place. It is a place of comfort where you no longer will lose it — that you thought was in your underwear drawer.
As Mark and I co-signed on the accounts and watched the kids pick pin numbers and passwords, I wondered if we’d taught the kids the right lessons about bank accounts. Given recent banking debacles, were we deceiving teenagers when we encouraged them to believe that banks are safe? That they are better than underwear drawers?
I’ll keep you posted this year as Lily, Max, and Sam tote around their check registers to record expenses and deposits. And maybe you’ll let me know through comments what your parents did with you that seemed to work — or what you, as parents, are doing with your own children to teach them smart money management. I’d appreciate all the stories and advice you’d care to share.