At some point before they're out of the house, you want your teenager to start learning financial responsibility and handling their own money. The time is coming soon when they'll be on their own with no choice but to be in charge of their own finances, and letting them learn the ropes while they're still under your watchful eye can help prevent financially devastating mistakes later on. You may or may not already have a savings account for your teen, but now is the time to consider helping them set up an account they can access more easily. Take a look at a few tips for opening your teen's first checking account.
Skip the Prepaid Cards
Many parents, afraid of overdrafts or damage to their child's credit, opt for parent controlled prepaid cards instead of checking accounts. However, this is not the best financial decision. Prepaid cards come with a whole host of fees that you can avoid completely just by opting for a regular checking account with a debit card. Just funding the card from your own credit card can cost as much as $2.95 each time you want to give your child money.
Overdraft fees are becoming less common now that the law requires you to opt-in for each overdraft, and a checking account won't affect your child's FICO score. Use prepaid card offers as an opportunity to show your teen why some financial products are too good to be true – comb through the fine print together and check out all of the fees and costs.
Set Movable Limits
Think of your teen's first account as a bicycle with training wheels. You want them to be able to ride, but you don't want them to take off at full speed just yet. So, set some initial limits on how your teen will use the account, and then give them more freedom as time goes by. For example, you may choose to limit them to writing actual checks at first, so that they have to think about and write down how much they're spending. When they prove they can spend responsibly and keep the checkbook balanced, then you can move them on to a debit card.
Some teen checking accounts come with parental controls that can help you set and adjust your child's limits. For example, you may be able to set the specific amount that your child is allowed to draw at the ATM per day. Take advantage of parental controls that come with the account to help customize this learning experience for your child.
Monitor, but Don't Interfere
Checking accounts for teenagers are usually treated similarly to joint accounts – at least one parent should have full access to the account along with the teen. That means that you should be able to view your child's account online and see how they're managing their money.
Keep a close eye on your child's spending and budgeting, but don't stop them from making mistakes within the parameters that you've already set for them. Your teen needs the space to learn on his or her own, and also the space to make a certain amount of mistakes. An embarrassing "card declined" message at the mall or a lack of access to funds on the day of an outing because their ATM limit has already been reached can teach more in a couple of minutes about the importance of spending and budgeting wisely than you could teach in any amount of lectures. Afterward, you can talk to them about how they can avoid those mistakes in the future.
By learning to budget, balance a checkbook, and navigate bank transactions as a teenager, your child will gain a valuable skill that will help them for the rest of their lives. For more information on different account perks, check out sites like www.titansbanking.com.Share