Learning how to manage money at an early age can help set up children for a financially stable future. Since they will not want to keep their allowance in a shoebox forever, familiarizing themselves with the nuts and bolts of a checking account is an important milestone.
Many financial institutions offer teen checking accounts, which serve as an excellent introduction to the sometimes complicated world of banking. To get you and your child started, here’s an overview of features to look for as well as some insight into ground rules you may want to establish before signing up for an account.
How teen checking accounts work
Although many financial institutions offer checking accounts for customers as young as 13, most require at least one parent or guardian to serve as a joint account holder. Ultimately, this is in everyone’s best interest, as it reduces the risk of financial institutions losing money due to inexperienced customers and helps prevent young customers from mismanaging their funds.
A joint account setup provides both the parent and child access to the account. The adult will be able to transfer money into the account, which will be especially easy if you have accounts at the same financial institution. You may even have the option of setting spending limits or receiving alerts if the balance is running dangerously low or if the spending limit has been exceeded.
Finding the best account for you and your child
Teen checking accounts vary slightly among financial institutions. However, there are a few common factors you ought to look for when shopping for an account:
- It’ll prove handy to open an account that comes with a debit card. Check whether the institution enforces daily ATM cash withdrawal and point of sale limits. That way you won’t lose sleep every time your child goes to the mall.
- Before signing on any dotted lines, check to see whether there’s a minimum amount requirement to open an account. Is there an ongoing minimum balance requirement? It’s also worth avoiding institutions that charge unnecessary fees, such as a monthly maintenance fee.
- Finally, consider the quality of the educational resources that the financial institution offers. These can serve as instrumental tools in helping teens get a better grasp of basic financial concepts, like how and why to build an emergency fund.
Approach the process of finding a teen checking account for your child in the same way you would go about looking for your own account.
Setting ground rules
Once you and your teen have selected an account you’re both happy with, consider reviewing ground rules and financial tips. For example, to highlight the importance of saving money without leading a completely frugal lifestyle, help your child create a monthly budget.
Underline the importance of knowing how much cash is in one’s account to avoid overdrafts. Even if the account comes with overdraft protection, this is a good habit to get in to at an early age, and something teens will be glad they learned.
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