5 Things Your Teen Needs (or Doesn’t Need) in a Bank Account
Teens taught to save from an early age may gain an advantage over kids with no parental direction concerning finances. How you handle your money matters will have a strong impact on your child's view of money and the values they hold into adulthood. While many people across the county are still struggling to put away cash from each paycheck they receive, teens that learn healthy financial habits will likely struggle less with their money management. (See also: Helping Your Teen Understand Money)
In addition to prioritizing savings, teens also should start learning the basic fundamentals of personal money management such as being responsible for balancing their checkbook and paying any financial responsibilities on time. As a teen's financial responsibilities increase, they will need to establish a savings account and a checking account. (See also: Top 5 Prepaid Debit Cards)
Here are 5 things every teen needs in a bank account.
1. Money, Money, and More Money
Opening a bank account with or for your teen isn't enough to teach a savings lesson. Parents would be wise to sit down with their child and talk about the benefits of savings and the best methods for hanging on to their cash.
Ideally, establishing a must-follow rule of savings, such as 10% of all money they earn or receive, will help a teen get into the habit of heading to the bank first rather than the mall. The savings account should never be touched for any purpose so it can be allowed to grow and earn interest for long-term financial stability. Checking accounts will need to have sufficient amounts of cash for checks written. (See also: Advice From a Financially Savvy Teen)
2. More Benefits Than Fees
Banks have been capitalizing on the many fees they are creating to keep making huge profits. When it comes to a new account for teens, it is best to shop around at different banks rather than just head to your preferred branch. Your teen should have a bank account that doesn’t charge a ton of excessive fees for administration or transactions. Be sure to review the associated fees with your teenager.
3. Avoid Flashy Incentives
There is still a lot of competition in the banking industry, so it is important for teens to understand what makes an account suitable for them. Banks often offer incentives that seem great on the surface but could leave the customer dissatisfied with the other account terms. Teach your teen to look past the free stuff and focus on the bank's conditions, fees, and limitations. They should find a bank that offers low-cost or free accounts that do not limit transactions including at the ATM and through checking accounts.Take time to read the fine print with your teenager and if you don't understand the terms, visit with the bank's manager for an explanation.
4. Accessible Banking
There is a good mix of brick and mortar banks and online banks offering great deals on bank accounts. However, some online banks or smaller institutions are not as accessible as a teen needs them to be. If they plan to use an ATM card for withdrawals or need to make cash deposits, they will need to be able to access a bank in person. Consider the accessibility of both the bank and its ATM locations when helping teens make a decision. If you anticipate in-person visits to the bank to cash or deposit checks, an online bank may not make as much sense as opting for a bank with a local branch.
5. Seek Out Banks With Educational Resources
Since your teen is just entering the world of personal finance, finding a bank that also offers free resources for financial education is a wise move. Many of the major banks offer online tools and guides for learning the basics of money. As parents can find it difficult to get lessons across to their kids, online tutorials can help close the gap in learning. Phone apps and other technologies offered by banks can be a very effective teaching tool for today's teens. (See also: Money Tools and Toys for Every Age Group)
- Wells Fargo offers Teen Checking (SM) that include parents in alert messages and account management.
- Bank of America offers a lot of free information on their Student Bank Accounts and Solutions page.
- Chase also offers a High School Checking Accounts program for teens to help them manage their money.
Have you set up a savings or checking account for your teen (or younger child)? Has it been educational?