For most young adults, their personal finance behaviors and habits are acquired during their formative years, and many consider themselves to be financially illiterate. Unfortunately, too many young adults struggle up a steep learning curve, often backsliding due to costly mistakes.
Those who are taken under the wings of their parents early on are much more likely to make good financial decisions and gain control of their financial future. The best place to start instilling good money habits in them is at your bank by helping them open their own teen checking account.
Why a Teen Checking Account is Important
A checking account is the most fundamental and useful tool in learning about financial responsibility. Teenagers like the idea of having some responsibility, especially when it means having more control over their money. Once they grasp the importance and practice of managing a checking account, they can graduate on to more advanced personal finance concepts such as credit cards.
Is Your Child Ready for a Teen Checking Account?
The teen years are an awkward period when it comes to money. Teens have outgrown their piggy banks and really don’t want to go to their parents when they need money. They also yearn to be treated like adults. However, whether they are ready to assume the responsibility of managing a checking account is totally the parents’ or guardians’ call. If your teen has yet to demonstrate responsibilities in other areas, then maybe a checking account is not the place to start.
The best time to open a bank account for teens is when it coincides with other benchmarks they have achieved, such as finding and keeping a part-time job. Or, maybe it is after they have demonstrated a high degree of responsibility when they first start driving. Although some banks allow kids as young as 13 to open a checking account, the right age may be when your teen demonstrates a willingness to accept responsibility. A checking account can be recognition of that achievement.
What to Look for in a Teen Checking Account
The first step in opening a teenage bank account is to find one of the best banks for you. Of course, you should check with your local bank first as not all banks are set up to cater to teenage bank accounts. You should follow a list of criteria that would be important in determining if it is the right bank for your teen to learn the ropes.
- Spending limits: If you want the ability to place limits on your teen’s spending, some banks offer such controls for daily ATM withdrawals or debit card use. You can also consider other restrictions for transferring funds, making withdrawals, or depositing money.
- Mobile and text banking: Most banks offer mobile and text banking, which makes it easier to track account balances and recent activities. Most apps have push notifications about low balances. When your teen starts earning paychecks, they can use their smartphone to deposit them via remote capture. Your teen should form the habit of reviewing their account daily.
- Low or no fees: Most banks offer a no-frills teen version of their checking accounts. There should be no monthly maintenance fees, but you can still expect to pay normal bank fees for overdrafts.
- Online account management: Your teen will quickly learn the ins and out of an online checking account platform. But the real reason for having one is so you too can monitor the account. It is a good practice to sit down once a month and review their account together.
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Opening a Teen Checking Account
Although some banks do not require it, it is recommended that you open your teen’s first account under your own name. This allows you to monitor your teen’s activities and enables you to transfer money instantly if it’s needed.
The bank will issue a debit card in your teen’s name as well as a small number of free checks. You should decide if you want your teen to have checks. Although they probably won’t have a big need for them, it is not a bad idea to teach them how to write one. The biggest decision you will need to make is whether you want to opt out of insufficient funds protection. With it, the bank will cover any insufficient funds from debit card purchases, but you will incur an insufficient funds fee. Without it, your teen’s debit card will be declined if there are insufficient funds.
From there, it becomes a daily teaching and learning experience. Taking the time to work with your teen to develop critical spending and saving habits can mean the difference between early adulthood financial struggles and long-term financial success.
Author: Jeff Gitlen