What You Need to Know About Bank Accounts for Teens
Back-to-school season is definitely different in 2020. But it’s still a good time to celebrate your child’s growth and achievements as they transition into a new academic year. For many, that can mean opening their teen’s first bank account. In addition to being a great teaching tool for positive money habits, it adds convenience for parents to have kids take charge of their own finances — with adequate supervision of course. Here’s what you need to know about bank accounts for teens.
Find the Right One
Work with your current bank or credit union to identify the right type of bank account for your teen. You may choose to open a joint standard checking account, but many financial institutions offer special accounts just for teens. Look for names like teen checking or student checking. Any account will require a parent, guardian or other adult over the age of 18 to cosign on the account. With bank accounts for teens, be sure to find out the details of what happens when they turn 18. Most of these types of accounts will convert to a standard checking account. You’ll want to confirm the details to be sure.
Double Check the Details
As with any financial service, you’ll want to look into all the necessary details before signing on the dotted line. Find out if there are fees associated with the account, whether or not there’s a minimum balance requirement, and most importantly, what the overdraft fees are. Ideally, that won’t ever be an issue, but it’s always a possibility with a new bank account user.
Establish the Ground Rules
Before setting up the account, work with your teen to establish the ground rules for account usage and maintenance. Some things to consider include: who’s responsible for making deposits, minimum/maximum transaction amounts, whether your approval is required before making a purchase, and if access to the account depends on maintaining good grades, completing chores, or meeting other behavioral metrics. Although the idea is getting your teen comfortable with managing their own money, they’ll make better choices with ground rules in place.
Debit vs Credit
Your teen’s new bank account will come with a shiny new debit card. Be sure they understand that a debit card is different from a credit card. Explain how the debit card can only be used when the account has enough funds to cover the transaction and how using it recklessly can result in high overdraft fees and negative marks on the account. Also be sure to talk about debit card safety and security, such as knowing where the card is at all times and not sharing the card or PIN with friends.
Reap the Benefits
Helping your teen successfully manage their first bank account is an important step toward adulthood. Good money management skills learned in high school will carry them into college or out into the world with their first adult job. It’s an important building block toward becoming a responsible consumer of financial products and will lead to better decisions when it comes to using a credit card, buying a vehicle, or eventually saving to buy their first home.