Teen Checking Accounts

As our children grow so do their monetary needs, and with them the necessity to educate them to proper financial conduct.

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Background

Out of all of the failings of the public education system in the United States, financial education is probably the biggest. Long gone are the days of teaching basic skills, such as balancing a checkbook, budgeting, and the like. As a result of this, it is more important now than ever to teach teenagers how to handle their own finances before going off to university or entering the workforce.

Many of the larger banks in the country have seen this niche waiting to be filled and have stepped up to offer tailored checking accounts for teenagers. This has ensured that there are many options to take advantage of. If your teenager learns how to handle a checking account now, when it comes time to handle large amounts of money as a working adult, the transition will be much easier. This type of education can help to put your teen on a successful journey to financial freedom.

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Lower Fees

To begin with, banks recognize that teen checking accounts will likely have less money in them. As a result, they typically have minimal, or no fees at all. This could include an exemption from maintenance fees for paperless statements, yet they might still charge a small fee for paper statements. While this isn’t necessarily true with all banks, you should simply eliminate all banks that charge anything remotely resembling the average checking account fee, as the balance in the account will simply not justify spending the maintenance fees that are associated with a standard checking account.

Interest

Some teen checking accounts offer interest. The APY (annual percentage yield) will vary from bank to bank but offering any little bit of interest is a win-win for both the teenager and the bank itself. This is because it introduces the teenager to the idea of depositing money into a savings account when they are older, and also gives them the ability to see the advantages of compounding interest.

Keeping Track of your Teens Checking Account

One of the many benefits of checking accounts tailored specifically for teenagers is that they often come with a whole host of tools for the parent to use. Most of these accounts are also geared towards online banking, which the average teenager will be very comfortable working with. Some banks offer a feature where parents receive SMS notifications when deposits and withdrawals occur in the account. They also offer email alerts, while limits can be set on the debit card. Some teen checking accounts also offer a range of online money management tools for teenagers to use.

Be Leery of Linking an Account

Some banks might require you to link an adult account to the teenage checking account, but this is not recommended. This requirement is often a way of ensuring that there is money to back up any overspending, which is what you want to avoid in the first place. The whole idea of a teenager having their own account is to be financially educated and financially independent, albeit in a very limited manner. The simple question is this: “how can my teenager learn about financial decisions if I automatically back every purchase?” It is because of this that you should avoid these types of accounts without hesitation. There are simply far too many banks out there willing to offer teen checking accounts as long as you are prepared to put your own money up as insurance.

No Overdraft Protection

One way that you can get into serious trouble with a teen checking account is to have overdraft protection. This goes back to linking an adult account to the teen checking account, it’s simply a risk-free way of having overdraft protection for the bank. However, if your bank offers the typical overdraft protection for your teenager’s account, you should decline this feature. You do not want your teen overspending, so make sure not to give them the tools to do so.

Make Sure to Shop Around

Some teen checking accounts are offered with a great suite of tools that will allow you to monitor all spending, and perhaps even give your teen the ability to plan for their financial future. Some offer interest rates that help save money, while others will allow you to simply take a picture of a check to make a deposit. There are a whole host of extras tied to these accounts, so therefore, you should be willing to shop around and find the best option for your teenager. Most major banks offer some variation of a teen checking account and they also give you the ability to monitor these accounts. The fact is, many banks are much more aggressive in trying to attract more customers, even if it means creating account types to introduce the idea of banking to the next generation. You should take advantage of this, because certainly your child will need financial literacy in the future.

Quite often, teen checking accounts turn into adult accounts down the road. Make sure that there isn’t some type of fee to convert the one account type into another and make sure you fully understand the differences between the teen and adult checking accounts. The ultimate goal is to teach your teen the importance of money and handling their finances.