Teaching teens about checking accounts

Mom and teen daughter talk about money while biking
July 17, 2018 | Katie Pins

Teaching kids about money is so important. Studies have shown that the place we learn the most about personal finance is within our family. Teaching about saving is just as important as teaching about how to spend and budget. A teen checking account can be an important first stepping stone for a teen to put what they are learning into practice. As you continue to educate your teen about the banking process, point out these useful lessons.

Lesson 1: How to pick a checking account

Teach your teen that not every checking account is the same. Shop around together for an account that is convenient, works well with personal financial management tools (PFM), offers a high-interest rate and is free.

Teen checking accounts are typically for 13-to-17–year-old teens. When the account holder becomes 18, it is common for the account to automatically roll into a regular checking account. Therefore, convenience will be important, especially when they move out, whether into a college dorm or an apartment of their own.

An account that offers mobile and online banking will cater to teens’ banking needs. Find an account that has a debit card that is compatible with Samsung Pay, Google Pay and Apple Pay so your teen can use their debit card from their phone. ATMs will also be important for convenience. All Alliant checking accounts have ATM rebates for out-of-network ATMs so your teen could use their closest ATM for free.

While you’re shopping, see if accounts integrate well with PFMs. These apps can help your teen to track their spending habits so they can see trends. PFMs make it easy for a teen to see the impact of their weekly smoothie run and to learn money management.

Also, look at interest rates and fees. You and your teen will quickly realize that not every account is the same. A high-rate account will teach your teen the power of compound interest and how APY works. Your teen’s money could sit in an account and do nothing or it could work for you and gain interest. Who doesn’t love to see that monthly interest payment instead of a monthly fee?

Speaking of monthly fees, look for an account that has no minimum or maximum balance as well as no monthly service fee. Like I mentioned above, your account may roll into a regular checking account at 18, so, research a bank or credit union’s regular checking account. You don’t want your teen to be suddenly hit with service fees when they turn 18. “Adulting” is hard enough already without that!

Lesson 2: The importance of money management (Fees could add up)

Now that you have shopped together for a teen checking account, the first teachable moment is that fees could add up, even for a free checking account. Your teen will now have some more responsibilities. This includes avoiding withdrawing too many funds. Visit your new bank or credit union website for their fee structure. Explain the different fees and how to avoid them.

As a parent, the good news is that teen checking accounts are joint owner accounts. This means you'll be able to view account activity online. You'll have greater peace of mind given your joint owner access and the various controls that are typically placed on teen accounts to help protect your teen from getting into financial hot water. You can transfer money into the teen checking account easily, set up recurring transfers and monitor activity. With an Alliant Teen Checking account, your teen has daily debit card spending limits and daily transaction limits, while you have full access to the account. A teen checking account gives your child the freedom to learn money management in a safer place.

Lesson 3: Checking and savings accounts are different

Your teen may already have a savings account, but checking accounts should be used differently:

  • Checking accounts are for regular use in making transactions, whereas savings accounts are places to keep money for short-term or long-term goals.
  • It is important to transfer money into your savings account because savings accounts generally gain more interest. It’s also important to always put some money toward long-term goals – no matter how big or small the amount is.
  • Savings accounts only allow six withdrawals a month under federal law. A checking account is designed for many transactions.

Lesson 4: How to write a check

Even though banking is continuously moving toward digital transactions, your teen will most likely need to write a check every once in a while. Below is an image of a check along with guidelines on what information goes where when you pay with one.

1. Date of the check. This is important because banks don’t have to cash checks over 180 days old.

2. The payee’s name goes here. The payee is the person or company you would like to make a payment to.

3. The amount you intend to pay in numbers. Don’t forget the decimal point, because you don't want to pay $10,275 instead of $102.75!

4. The same amount you intend to pay in words. Note: the word “and” means decimal point when writing out numbers. You would not write “one hundred and two.” Cents is the number over 100.

5. This is where you note the reason for your payment. When paying a bill, fill in the invoice number or your account number in the Memo field to ensure that the money gets credited to your account.

6. Your signature.

7. Your bank’s routing number.

8. Your checking account number.

9. The check number. 

Introducing teens to the basics of money management will pay off for a lifetime. By going through the process of setting up an account together, your teen will learn how to compare accounts, pay bills, use a debit card and use other electronic services. They will learn about banking fees and the value of high interest rates. By the time they turn 18, they’ll hopefully have a better grasp on ways to save and how to stick to their financial goals.

Katie Pins is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.

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