6 Ways Parents Can Help Teens Achieve Early Financial Independence | Dan Sheeks | Episode 205

Money doesn’t buy happiness but not having enough creates problems. Relationships get strained, mental health suffers, and opportunities are limited. But what if our teens could achieve early financial independence? What if they could have enough income to give them more choices about their job or how they spend their time? Dan Sheeks works with teens who are striving for early financial independence. Dan joins Mighty Parenting podcast host Sandy Fowler to discuss 6 ways parents can help teens gain fundamental financial skills and get a leg up on financial independence.

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A Favorite Quote from the Show: 

Reaching early financial independence doesn’t mean someone is going to stop earning and producing for the rest of their life. They’re just going to do it on their own terms.

High Points From Our Conversation on 6 Ways Parents Can Help Teens Achieve Early Financial Independence:

Parents need to talk to kids about money. Talk in the car, around the dinner table, on your road trip, anywhere you can. We need to make our teens financially literate.

You have more financial experience than your child so you have something to teach. You can even use your mistakes as a lesson or motivator. 

Earn Income with Side Gigs

Teach your teenager to look for ways to have more than one income for their household.

Most people have a full-time job which is their most significant income source. You can have other income streams. While they don’t have to match that income, they still make a big difference in your life and create security.

Some income streams are passive and require little or no effort from you.

Encourage them to create a side hustle, do something that brings in extra money:

Teach your teen to create a stable financial future by paying themselves first

The #1 rule is to pay yourself first. The first bill you pay should be to your future self. Encourage them to save 15%, 20%, perhaps 30 or 40% of their income while they’re living at home and parents are paying the bills.

Let them have the experience of managing their own money

Make your teens responsible for some of their own bills and gifting or charity. Then they can have some fun too.

Start with basic personal finance strategies before moving onto learning to create financial independence.

What does it mean to reach early financial independence or early retirement?

There are other options for creating income besides a traditional 9-to-5 job.

“How would you feel if you could retire before your parents?”

Reaching early financial independence doesn’t mean someone is going to stop earning and producing for the rest of their life. They’re just going to do it on their own terms.

The path to early financial freedom isn’t for everybody. It takes sacrifice.

Teens need to learn about credit scores

Talk to your teenager about their credit score and help them get a great score.

Parents can add a minor to a credit card as an authorized user and the on-time payments can be reported to the child’s credit report. Verify your credit card company does this before signing up.

When they turn 18 they can apply for their own card. They should use it to pay for their everyday expenses and pay it off every month.

If they’re very disciplined with their credit card then when they turn 19 they can apply for a second, using both and paying them off every month. They could even get a 3rd card when they turn 19 1/2, using one for gas, one for food and one for clothes or entertainment.

They have to use the cards for it to impact their score. It’s the on-time payments that skyrocket their score.

When they get to be 23 and their score is good they can cancel 1 or 2 of the cards.

Credit cards are revolving credit which is one type of credit. They can apply for a car loan or a small personal loan and make on-time payments for that loan. This will skyrocket their credit score.

Just don’t screw it up! The biggest mistake people make is not paying loans or credit cards on time. If you miss one it’s on there for a long time.

If you have a solid history with your credit card company and miss a payment you can call and ask if they’ll remove it from your history. They may be willing to do this as a one-time thing.

Young people’s scores change dramatically with a single event because they don’t have a long history.

Let your teenager handle the money for their own expenses

Parents can empower teens to handle their own money for their own bills while they’re under your roof. This way mistakes are not as significant as when they are out on their own.

There’s a strategy you can use which is pretty drastic but does a great job teaching kids how to handle money. Give them a monthly income, which is significant. This income will cover your expenses. Any food you eat in this house is free and you can live in this house for free but all other expenses are yours. If we go on vacation you’ll pay your portion of the hotel room, your subway fair, etc. This isn’t a punishment. You’re giving them enough money to cover their expenses. But they will look at the menu differently when they’re paying vs. when parents pay.

Allow them to make mistakes. When they have a month where they spend more than they received talk to them about how that happened.

Tracking their income and expenses, watching account balances go up and down gives them great skills they need when they move out.

You can do this in phases and to whatever extent you want.

Remember, mistakes they make now have a much smaller impact than the mistakes they’ll make later.

Resources:

First to a Million: A Teenager’s Guide Achieving. Financial Independence by Dan Sheeks

Money Lessons Teens Must Know | Brian Ursu | Episode 151

How Personal And Financial Self-Care Can Set Your Teenager Up For Success | Christina Gatteri | Episode 134

Our Guest Dan Sheeks:

Dan is a high school Business/Marketing teacher, real estate investor, and personal finance advocate in Denver, CO. In his 18 years of teaching high school, he has taught a variety of business subjects including personal finance, entrepreneurship, and marketing. Dan’s passions include working with teenagers, advocating for personal finance education, investing in real estate, and promoting the FIRE movement. Embedded in his classes is the co-curricular DECA club in which students travel, compete, acquire leadership skills, do community service, and have fun! His students have competed at the national level in entrepreneurship, personal finance, marketing, and hospitality services with much success over the years.

To learn more or connect with our guest visit https://www.sheeksfreaks.com/

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Sponsor Tip: 

One of the best ways to help kids learn is to allow them to make mistakes. The older they get the bigger the stakes and the greater the fear parents have around allowing them to make mistakes. So start today. Just take a deep breath and let them learn.

And if you want them to learn in a safe environment get a Troomi phone so you can set up appropriate access to everything on the phone right in the parent portal. Troomi lets you guide your child in learning to use smartphones is a safe and healthy way with plans that grow with your child. 

You can learn more at troomi.com and use the code MIGHTYPARENTING to get a free phone through December 31st ($50 off after that). And if you want to know more of Sandy’s thoughts on using Troomi to help your child develop healthy technology habits just email through the contact page on mightyparenting.com.

From Sandy:

How to Talk to Your Teen — free email series at MightyParenting.com