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It’s never too early to start instilling the importance of financial literacy into your child’s mind. From setting up a student checking account to preparing for student loans, we're taking this episode of Money Smarts to discuss tips you can use to prepare your teen for financial independence.

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HOST: Welcome to Money Smarts, a podcast of Summit Credit Union, where we connect people and inspire action to create member and community wealth. As a not-for-profit financial cooperative, Summit Credit Union exists to improve our members' lives and help them reach their dreams. Our Money Smarts podcast is just one way we engage members in the community in conversations about money that inspire you to spend smart, save more, and take action to build a richer life.

ANGELA FITZGERALD WARD: Welcome to Money Smarts, I'm Angela Fitzgerald Ward, financial education coordinator with Summit Credit Union, and I'll be your host for our time together today. I am delighted to have with me, Amy Crowe, a financial education specialist and certified financial educator with 20 years of experience teaching people about money. She's also responsible for leading Summit's signature financial education program called Project Money. Happy to have you here today, Amy. Welcome.

AMY CROWE: Thanks, Angela.

ANGELA: So today's topic of conversation is financial independence for teens specifically. So to frame our talk today, I have Wikipedia's definition of what financial independence is. So Wikipedia defines financial independence as having enough wealth to live on without having to work. Financially independent people have assets that generate income or cash flow, and that is at least equal to their expenses. So, Amy, what do you think about that definition from Wikipedia, which, you know, anyone can contribute to Wikipedia and generate content there. So what do you think about that definition and how would you apply that with your daughter and what you teach her at home?

AMY: Oh, gosh. You know, that looks so far distant into the future for most people, especially since we're talking about teens, when they're just figuring out how to save their money and spend their money. And, you know, I run and lead the Project Money program, and it's this reality-based financial challenge where we have adults who are living paycheck to paycheck. And they dramatically change their finances in seven months by working with a financial coach.

And really, you know, when you are teaching young kids about money, a lot of times, it's the basics. And then you have to figure out, when you're an adult, all your employee benefit plans, and how to save for retirement, plus how to pay for a mortgage, and, all of those types of things.

So I look at financial independence as this big journey through life. It's something that you strive for. You may not get it for a very, very long time, but you have to create the really solid financial habits really young to be able to move that forward. So you're talking about my daughter, and she is 14 now. And so we're really looking at different ways that we can help her practice with money along the way, so that she can start building those habits when she goes off to college and when she has her first job and different things like that. So I'm excited about this topic today.

ANGELA: Great. So what kinds of habits is she learning now that hopefully will stay with her as she ages?

AMY: From a very young age, we gave her multiple piggy banks. So there was pig and a sheep and there was a couple of different other ones, and she really practiced putting money in those. And that was about all she could do when she was really young. And we kind of progressed to having multiple accounts underneath her main account number.    

So if she wanted something special at the store, which, of course, when you're a tween, you definitely want that, I could easily go onto my mobile app. I could say, well, you have this much in your savings account. Are you willing to take it out of your savings? And she'd be, yes or no. And then I would just transfer it from her savings to my checking account, and we could buy that item. Now that she's a teen, my gosh, we recently gave her her first checking account and debit card.

ANGELA: I did want to connect that to kind of what we do here at Summit in terms of financial education at the high school level. So my role really entails talking with students, primarily in the classroom, but also in community spaces, about their money so that they can learn now different practical principles around money management and grow up to be financially astute adults, is definitely the goal. And so we have a few tips and things we generally share in the classroom when speaking with students and with teens about how they can manage money and, ultimately, how they can acquire this financial independence that we're talking about.

And so I want you, Amy, to weigh in as we're going down our list of things that we share. So the first being just being open to talking about money. So for both of us, that's part of our job. So we, I think, have generally acquired an openness just by proxy of that's what we do on a day-to-day basis, but in some spaces, that's not always the norm, right, to talk about money.

So in some families, students and teens are growing up not hearing those conversations. They know that money is a part of their lives, it impacts them in different ways, but in terms of actually understanding the day-to-day nuances of managing it, they may be clueless if those conversations are never had at home.

AMY: I think that when we talk to our members about how to reach financial independence with our teens, and give them that first checkbook and savings account, and, they're off to college, and they have to really manage their budget, you know, how do we instill those things? I think it's definitely having a conversation at home about wants and needs. Framing it a little bit differently, I think for many parents, the gut reaction is to say, we don't have any money for that, or something to that effect. When a simple reframing can be, we're looking to spend our money in a different area, or we have it budgeted in a different area. If you want it, it needs to come out of your savings account.

Because what it does is it tells the teens and the young adults, we, as your parents or guardians, have goals and dreams ourselves that we're working towards, and we have to prioritize, and we have to make choices. Now we want to make sure that the kids are able to do some of the things that they want to do. So there's prioritizations in our budgets, right? I think having those conversations and reframing some of those things is important.

Now there are some people who are living on very, very low incomes, and that conversation doesn't work because the money simply isn't there. And so then it does become more of a, you are prioritizing needs, versus prioritizing wants and needs. So that's when the kids can start feeling more empowered to be able to get that job, to be able to have a little bit more financial independence. And then they're actually asked to help out with the home budget and have to divide their money out to help mom and dad, and sister and brother, and different things like that.

So there's lots of different nuances in there when you want to be open to talk about money. And I'm not talking about sharing incomes or how much debt you have or how much your house is worth, but it's those little simple teachable moments that you have to be able to get them thinking about why you're not allowing them to do something.

ANGELA: Exactly. And so that's something we encourage students, when they speak with us, is to go home and have a conversation with your parents, with your guardians about money, about finances, so there's an understanding when moving forward in different arenas.

AMY: Well, especially with college.


AMY: I mean, you can do this with a freshman, sophomore, junior, senior. You don't want to be surprised and all of a sudden think that your parents have been saving for you for college, and then there's nothing there. And life changes on a dime. I mean, they could've been saving and needed to use the money for something else.

And so it really becomes understanding and being very empowered when you're a teen and when you're a junior and when you're a senior looking at those scholarship opportunities, it becomes really understanding how you can assist your parents filling out the FAFSA because there's information that they need, there's information that you need. But ultimately, when you're taking out student loans to fund your education, you're going to want to start figuring out the debt load that you might take on. Even as a junior, figuring that out, depending on the number of schools you're looking to go to and how much those cost.

ANGELA: That definitely speaks to the need to have those conversations and not to delay them or postpone them.

AMY: Have them earlier.

ANGELA: Yes, rather than later.

AMY: Yeah, yep.

ANGELA: Definitely. And so the second tip that we have, something that we definitely enforce in the classroom space, is starting with a savings account. And that's not just in the classroom, but any conversation we have with young people when it comes to money management and even broaching opening an account with a financial, it's always start with the savings account. Typically, those accounts are accessible at younger ages than a typical checking account that comes with a debit card would be. But the importance of that is you're, number one, you have an account to access, and it helps to instill the importance of saving. You want to speak to that, Amy?

AMY: You know, a lot of people think it might be difficult to open up a savings account. And when you are banking with a not-for-profit financial cooperative or a credit union, typically, it's $5 to open up that savings account. And it's really simple and easy with a photo ID, an address, a Social Security number, and then $5. That's when it becomes really easy, whether it's money that was gifted to them at a certain time period, whether it's an account that a parent starts for them that they maybe don't even touch until they actually have a real job, but they have that account that was established.

Starting with that savings is really key. I mean, you could even see your savings account balance on your mobile phone, which is nice. And then you can even link it so that parents could link their checking account to the student's savings account and different things like that. So there's a lot of different options but creating that savings account so that they can see their money grow when they do get interest on that account is also important so that they understand the power of compounding interest.

ANGELA: So in addition to a savings account, once a student has reached of age to open their own checking account, that's also encouraged, particularly, when they get their first job. So they can set up direct deposit for those paychecks and avoid other mediums designed to give students access to their money, but that could come at a cost to them.

AMY: Yeah, that's true. And with my daughter, what we did is she tends to get some, she's very blessed, she gets some checks from relatives who live far away for her birthday. So we opened up a checking account with her, so that she could get mobile banking, and at some point, also remote deposit, so that she can take pictures of her checks, and then I wouldn't have to bring them into the credit union, or we wouldn't have to make an extra trip, different things like that.

So being able to not only have access to a savings and a checking account at a very early age, even if you're funding that savings and checking account with an allowance or whatever that might be is really important. So they don't necessarily have to wait until they have a job with direct deposit.

It's also interesting too when you have financial independence for teens, a lot of times their first job is going to encourage them to get a plastic card because they may not have a checking account number and a routing number. And that plastic card is a payroll card that puts their payroll on it. And there's lots of different fees that are associated with that. And so when a student is looking for their first job, I highly recommend also setting them up with that savings and a checking account while they're searching for that job.

ANGELA: And the nice thing about setting up a checking account that we've already referenced before is the ability to access your account information through an app. And so digital channels we've already alluded to in the form of mobile check deposit, the mobile app piece, but having those digital platforms actually be used, which is funny to me, when I talk to high school students who haven't downloaded an app that's associated with their financial. And I'm like, why not? I know you have a cell phone.

Like that would make it super easy for you to access your account information at a moment's notice and inform some decisions you may want to make about your money. But definitely encouraging those, the usage of those digital channels when it comes to money management, I think, is a vital component to supporting students becoming financially independent.

AMY: Yeah, it's really interesting too because at a very early age, we wanted to provide an outlet for our daughter to be able to give back to her community. And so we set up a sub-savings account. At Summit Credit Union, when you have your main account number, you can actually open up little sub-share accounts, and you can name them for whatever you want. So we fund an account that we call the Charity Account.

And a couple of times a year, whenever there might be a fieldtrip that comes home from school, and it says, would you like to donate to allow another student to go? Or it's the holiday season, and we have multiple things coming into our home asking for donations, or we see a story in the Wisconsin State Journal or something like that, we have the opportunity then to have her be able to give with that pool of money that we've established for her.

And that was really important for us to connect to our value system and be able to empower her with a pool of money to be able to do that. And I'm really hoping that when she goes out on her own, that she'll continue to establish that moving forward, that she has a pool of money that she can use to give back.

ANGELA: And that speaks to our last tip, which is budgeting and planning for the future, is a tip that we highly reinforce when talking with students, with young people, about their money. And that will support them becoming financially independent at some point in the future. And so ideally, they have a savings account, they'll have a checking account, they'll have downloaded the mobile app that will facilitate their being able to manage and track their finances electronically, and that will support their being able to chart out a pathway for their money that supports future goals.

So, for example, buying your first car. You may have a timeline in place that aligns with when you're going to have your license and different things like that. And so allowing for saving incrementally until that amount is saved up for, a student can track that progress in their app. And we have Summit's Climbr, right, which is a tool that students can utilize through the mobile app that supports this planning.

AMY: Yes, absolutely. So Climbr is located inside the online banking tool of our website. It's, once you set it up through online banking, then you can access it through the mobile app, but you have to set it up through online banking first. And you hit the Climbr tab, and it pulls in all of your account transactions from all of your accounts, it pulls in your income from any direct deposits, and it categorizes it all for you, and it creates something called tags.

So I would assume that, you know, if a teenager was using Climbr, there would probably be a lot of fast food purchases and clothing, retail store purchases on their checking account. Maybe even some movies and probably a lot of ATM withdrawals. And so theirs would be much simpler than an adult, which, you know, has a lot of different things that they're running through their transaction accounts. But it's going to, really, it's doing the math for them and showing them very clearly how much you've spent on clothing, how much you've spent on the movies, how much you've spent eating out every single month.

And so when they wonder why they don't have any money in their account, they could go onto their mobile app, and they could say, you know, Climbr, show me my budget, and it will show them exactly how much they’ve spent in these categories. And then they can, like you said before, make different choices to be able to move forward. And I think one of the big things that people do, too, Angela, is they actually have their direct deposit going into their checking account.

And I'm a big proponent of having your direct deposit going into a savings account first. And then only putting enough money in your checkbook that you're budgeting for the things that you want. Otherwise, we always say to ourselves, I'll save whatever is left over. There's never anything left over. At least that's what we hear from our members.

And so it really becomes, how do we train and guide and help our kids practice with money as we're teaching them financial independence? And I think a lot of it is being open about money, opening up that savings account, giving them the digital tools that they need, but then also those critical thinking skills of what is a want, what is a need.

And so when they're planning for the future, you know, way out, we're talking about this financial independence, I speak to college kids about setting up IRAs very early on. And even setting up mutual funds for college early on to be able to pay for some of those expenses. Just because you're young doesn't mean that you can't use some of those more advanced financial tools to be able to set yourself for, up for success in the future.

ANGELA: Those are awesome tips for both teens as well as their parents to put some of those things in place to support the accomplishment of that financial independence.

Well, that's the time that we have for today. Thank you so much, Amy, for joining me in our conversation about promoting financial independence for teens.

HOST: Join us next time for our Money Smarts podcast to get more tips, tools, and advice on how you can own your money. Discover more money smarts at Like us on our Facebook page, tweet us, or pin something from our Pinterest boards. That's all for today. Thanks for listening and remember, it's your money, own it.