by Scott Pape
Freedom.
Most teenagers want a car when they turn 18. Other teens want to travel overseas.
Well, in all cases the formula is this:
Flipping Burgers × Time = Freedom
Once your kid gets a part-time job, you’re going to sit down with them and plan out how much they need to save each week to achieve something cool.
By setting up an automatic direct debit and diverting $20 a week into their Smile account, they could have more than $4000 by the time they finish school.
That’s a trip to New York City.
Okay, the two teen accounts so far—Splurge and Smile—have the same names as the jam jars, which makes it an easy transition for kids when the time comes. For the third account we’re going to do something a bit more grown-up.
The Mojo account
This is a high-interest online savings account preferably opened with another bank, so they don’t see it in their regular day-to-day banking app.
Regular Barefooters will know that a Mojo account is your financial ‘get out of jail free’ card—when you have savings set aside, you’re never financially vulnerable. You call the shots.
Honestly, I could fill a phone book with the emails and letters from people who’ve been saved by setting up their Mojo account, first with $2000 and then later building it up to three months’ living expenses (see my previous book).
However, you may be wondering why a teenager needs a Mojo account when they’re living with their parents: aren’t parents the ultimate Mojo account?
Yes, you are.
Yet there’s going to come a time when your kids aren’t living with you anymore (promise).
It kind of just creeps up on you without you noticing—until the day it happens. Either your kid goes off to university, or they decide they want their own space. However it happens, in the space of a whirlwind month or two they go from grunting at your dinner table to walking out the door and becoming a fully fledged adult.
For most young people that’s when reality sets in. ‘Things are so, like, expensive.’
There’s four weeks’ rent. There’s four weeks’ bond. There’s furniture and furnishing costs. And so when the bank sends that credit card application via email (just for emergencies, of course), they think to themselves:
Finally I’m being treated like a card-carrying adult! And besides, the bank wouldn’t be offering me a credit card if they didn’t think I could pay it back, would they? This is just what adults do, right?
And then, like a friendly drug dealer, the bank offers to keep increasing the credit card limit.
Until they’re hooked.
As I’m writing this, here’s the lead story in The Age . . . (Which bank? The Dollarmites Bank.)
BANKING ROYAL COMMISSION
‘138 years to pay off debt’: David asked the CBA for help. So they gave him more
David doesn’t understand why the bank ‘kept offering me more money’ after they were told he was a gambler.
Source: The Age, 23 March 2018
The mission of this book, and of the Barefoot Ten, is to make sure your kids are financially strong so that they can sidestep all the traps that middle-aged men in skyscrapers are devising right now to rob them of their money . . . and their confidence.
That’s why they need to start building up their Mojo from the day they get their first pay packet from their first part-time job (as I’ll discuss in Chapter 7).
Look, it doesn’t need to be a huge deal. Once they’re working, have them set up a direct debit of as little as $5 a week into their linked online savings account, nicknamed Mojo (and I’ll tell you the best account to open in a moment).
Explain to your teen that this is money for when they become an adult and move out of home. And, in just four years of part-time work, they could have an easy grand or two saved up.
That’s an awesome buffer at the start of their adult life.
Again, the bank will encourage your teenager to get a credit card ‘for emergencies’, and then systematically train them to think of their credit limit as their own money.
Not your child.
They’ve watched their Mojo build up little by little for years.
Along the way you’ve repeatedly given them a huge amount of positive reinforcement—that they’re smart with money, that they’re better prepared than most adults and that they’re ready to take on anything.
That is incredibly powerful.
I guarantee that if they do this, they’re going to have a totally different view on savings, and credit, and life.
Okay, so those are your teen’s three accounts. In the upcoming Money Meal, I’m going to get you to sketch out this plan with your teen. Trust me, it’ll be worth it! It’ll set them up with awesome money habits right from the get go.
For now don’t get stressed about the details. I’m just giving you an overview of the basic account structure and how it all fits together. Now let’s talk actual bank accounts.
The best bank accounts for your teen
Australia may be the lucky country, but our luck runs out when it comes to banking: according to the Australia Institute, we pay some of the highest bank fees in the world. That explains why four banks trouser a combined $30 billion in profits each year.
Here are my ‘non-negotiables’ when it comes to choosing a bank account:
•Zero fees. No account-keeping fee, no ATM fees (not even the dodgy ones at convenience stores).
•easy access to your funds.
•a market-leading interest rate on savings.
Right now, the best account for your teens is the ING Orange Everyday Youth account.
You have to be at least 15 years old to apply.
Here’s you: Hang on, don’t you have to deposit $1000 a month and make five transactions with this account?
Here’s me: That only applies to adult customers. Those conditions are waived for kids under the age of 18.
And the ING Orange Everyday Youth account comes with a ‘risk shield’, which prevents the card from being used to purchase alcohol or gambling or pornography.
(Actually, that sounds like something my wife would love to put on my card. Imagine me at the bottle-o: ‘I’m sorry, sir, but your card has been declined. It says, “Check with your wife.”’)
Another thing I like about the ING Orange Everyday Youth is that the linked saver accounts pay cracking interest rates. (Well, as cracking as can be expected in this time of historically ultra-low interest rates.)
The linked ING Savings Maximiser is paying one of the highest interest rates of all online savers (at the time of writing). Your teen can set up two of these—and nickname them Smile and Mojo—at the same time as they’re applying for their Orange Everyday (Splurge) account.
(You could also look at the CUA Everyday Youth Account, with a linked Youth eSaver Account, which—at the time of writing—offers a higher interest rate for kids, but limits you to one Youth eSaver per child.)
Those last few paragraphs make me feel a little queasy, like I’m a cheerleader for ING. I am most certainly not. My only allegiance is to you, my reader. ING has a tacky credit card they’ve just launched, and if I find out they’re marketing it to kids who sign up to their first account, they’ll feel a dose of my Dollarmite wrath!
And one more thing: what if your kid already has a bank account?
Great!
Get them to compare it to the ING account (or any other account that’s on the market) and see if they can get a better deal. Again, this isn’t about the bank; it’s about boosting your kid’s confidence—knowing they’ve scored a good deal.
And when their Splurge transaction card comes in the mail, make a big deal of it. Get them to pull it out at the next Barefoot Money Meal and show you. Discuss the features—even get them to create a little presentation on the card. Really, this should be a proud moment for your teen.
Even better, if you have younger kids, they can now look up to their older sibling
as a financial ‘guru’.
It’s a proud moment for you, too. What you’re doing is changing your family tree: ‘In our family we make smart decisions with our money.’
And that’s gold!
* * *
A special note to future readers
Maybe you’ve picked this book up at the Romsey Op Shop in the year 2040.
Perhaps ING isn’t around anymore. Maybe that guy on Twitter was right and the global currency is now Dogecoins.
(Maybe not.)
Yet, regardless of how the world looks, three things won’t change when it comes to my advice on accounts:
No fees.
Easy access to your money.
And a market-leading rate of interest.
(Note for parents of younger kids: I’m pretty sure jam jars will still be around.)
In fact, because bankers change their rates all the time, and because kids are much savvier with a smartphone than I am, I humbly suggest that you get your teen to search the interwebs to see if there’s a better account on offer before they sign up with ING. But make sure they read the fine print when they compare deals.
Not only is doing their own research a smart thing to do, it also gives them some ownership of the decision.
And that gives them (and you) a chance to humblebrag about how smart they are in choosing a great bank account.
* * *
Everything you wanted to know about kids’ bank accounts in one and a bit pages
Should I pay my teen’s pocket money into their new bank accounts?
No—your house rule should be that all pocket money you pay goes into jam jars. The bank accounts are for your teens to divvy up their pay from their own part-time job—and remember, once they have a job, you stop paying them pocket money.
What if my teenager already has a different bank account?
It’s totally up to you—and them—whether or not they switch. However, once your teen turns 15, I’d encourage them to open their own bank account. And if they’re getting their own account, why not get the best one?
If you opened a high-interest saver in your name when they were little (‘Davin’s Savings Account’), you may want to transfer the money into their bank account once they’ve set their own up.
(Note: if as parents you’ve been saving up money yourself for your child’s future, do not transfer that money to their new accounts. I’ll have a lot more to say on this in Chapter 10.)
What about those kids’ savings accounts paying bonus interest?
Well, let’s take a look at one of them.
The granddaddy of kids’ savings accounts is the Bankwest Kids’ Bonus Saver, which pays a whopping 4.75 per cent per annum. So naturally there’s a catch. Actually, catches. First, you’ll need to set up two accounts. Second, if you miss a deposit you earn . . . 0.01 per cent. Third, after 12 months your money is automatically swept over to an account which pays just 0.75 per cent for amounts under $3000. Clear as mud, right?
Should I use my kids’ online savings accounts to save long term for their education?
No—don’t save money long term (as in 10 years) in these accounts; that’s not their purpose.
Later in the book I’ll show you exactly where I personally invest for my kids, and a little strategy I call the Barefoot Ladder Fund.
Should I still pay for my kids’ purchases on iTunes or Google Play?
No—it’s time to close your digital wallet. Now that all your kids have jam jars or bank accounts, if they want to buy stuff online they can buy a gift card (iTunes, or Google Play) from the supermarket (or pay you back from their jars).
The first payday!
Tonight you’re going to tackle two hugely important things in one Money Meal.
First, you’re going to clear up once and for all the question of where to store birthday and extra money by opening up zero-fee, high-interest online savings accounts for each of your kids.
If your teenager has a part-time job, they’re going to take a huge step towards financial independence—and score a major confidence win—by setting up their own ‘buckets’ too.
And then, you’re going to do your first ever payday—starting a family tradition that’s guaranteed to make your kids ‘good with money’ in just three minutes a week.
With a slice of pizza in your hand!
It’s your first payday, so make a big deal of it. Going forward, I recommend keeping payday until dessert as a tricky way to keep the kids interested.
Money Meal ‘shopping list’
•ING Orange Everyday Youth (ing.com.au)
•ME Bank (mebank.com.au)
•UBank (ubank.com.au)
•Comparison sites (finder.com.au and mozo.com.au).
BAREFOOT MONEY MEAL
FIRST PAYDAY
This meal’s a big one, because it’s your kids’ first time getting paid! What’s more, we’re going to show them that managing money can be easy . . . and fee-free.
ENTRÉE:
Remind the kids that they’ll have to wait till dessert for their pay.
Play the Family Legends game:
Do you know . . .
•who taught Mum and Dad about money?
•what we are saving up for as a family?
•how much Mum or Dad got paid pocket money when we were kids?
MAIN COURSE :
Kids up to age 14
If you haven’t already, use your phone to open a zero-fee, high-interest savings account with your existing bank. Name it after your child (‘Davin’s Savings Account’). If you’ve already done this, show them the account on your phone with their name on it. Tell them, ‘This is where extra money you’re given by Grandma or Grandpa (or other family) will be kept till you’re older.’
Teens 15 and above
Draw the Serviette Strategy (on page), or just show them the picture in the book.
Once your teen gets a part-time job, they’ll need three accounts:
•Splurge: an everyday transaction account (e.g. ING Orange Everyday Youth)
•Smile: a linked online savings account (e.g. ING Savings Maximiser)
•Mojo: another online savings account (e.g. UBank).
Have your teen open these accounts tonight online (they can follow up with the 100 points of ID later).
DESSERT:
It’s payday! Check the Scoreboard (1 minute), pay your kids (2 minutes), get them to divvy it up into the jam jars (3 minutes).
Then, everyone pitches in and does the dishes.
Money for jam, baby!
Today is a most excellent day.
Your teens now have their own bank accounts . . . and your kids have all earned their very first payday.
After this Money Meal your kids will finally stop acting like squawking seagulls every time you open your wallet or purse.
From this day forward you’ll be able to follow my lead and say: ‘Why are you asking me to buy it for you? You’ve got your own money!’
It’ll take a while before this message sticks, but they’ll eventually understand that if they want something bad enough they can work, save up and buy it themselves. You’re also way ahead of most parents when it comes to choosing the very best bank accounts.
Yet, more importantly, you’re now doing pocket money the right way: by using the money to ingrain the right behaviours—responsible spending, smart saving and being generous. Remember, where the money goes, the attention flows.
Next up, you’re in for a real family treat . . . you’re going on a Treasure Hunt!
‘Having his own accounts helped him buy a $10 000 car with cash!’
Elaine and Jim Armstrong, Mount Evelyn, VIC
When we first got married, we had no money—to the extent that we even had to borrow from an uncle to help with a deposit for our first home.
Thanks to Barefoot, money is no longer a stress for our family. Still, we don’t ever want our kids to be in that position so we are sending them with no shoes down the Barefoot pat
h.
Our eldest son, Damian, has been Barefoot since he was 14 and working in the school canteen.
He would come home from school with six $2 coins and put them in his jar. When they piled up we would go to the bank and swap them for a $100 note.
We didn’t want our kids to waste their money on bank fees, so we helped them set up three low-cost bank accounts for their savings.
Damian is now 18, working at McDonald’s, and still splits his income into his three accounts every week.
Having his own accounts has helped him save for big purchases.
He bought his first parcel of shares when he was 17. He bought his first car with cash—a 2012 Ford Mondeo for $10 000. And now he’s saving up for a house deposit!
But even more important are the lessons he’s learned—he now knows how to avoid getting ripped off by banks, and he has the confidence to be able to do whatever he wants without having to borrow money like we did.
We’ve always wanted our kids to be secure and do better than us. And, with Barefoot, they’re on the right track!
The Family Treasure Hunt
‘Muuuum, can we please get it? I really, really want it! Puh-leeeese, Mum! Mum? MUM? Mummy? . . . Liz?’
You’ve heard that before, right?
Your child could be holding anything from a box of Smarties to a golden retriever puppy.
It doesn’t matter what they want, it’s . . . relentless.
Well, in this chapter we’re going to tackle one of the biggest parental pain points: pester power!
The definition of pester power (according to Wikipedia) is ‘the tendency of children, who are bombarded with marketers’ messages, to unrelentingly request advertised items’.
This week we’re going to reverse the advertising brainwashing that’s bombarding your kids.
How?
By going on a Family Treasure Hunt.