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Teaching teens about checking accounts

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

By Kathryn 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, has a personal financial management tool, 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.

An account that offers mobile and online banking will cater to teens’ banking needs. Find an account that has a debit card that is Samsung, Google or Apple Pay compatible 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 have a personal financial management (PFM) tool within their mobile or online banking app. This app would be able to show your teen their spending habits. 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 already hard!

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 will be able to view and access the account once given permission. This offers greater peace of mind through a variety of controls. You can transfer money easily, set up recurring transfers and monitor activity. With an Alliant Teen Checking account, your teen will have daily debit card limits and 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 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.

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.

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 a note to remind you of your reason for payment. When paying a bill, fill in the invoice number or your account number in the Memo field to ensure it is credited to your account.

6. Your signature.

7. Your bank’s routing number.

8. Your checking account number.

9. The number of the check.

 

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.


Kathryn Pins is a marketing content specialist at Alliant. She’s passionate about finding and communicating meaningful financial information with Money Mentor readers. Kathryn is a saver who gets more excited about certificates and her Roth IRA than shopping. When she does spend her earnings, it’s on furthering her education, travel, unique experiences, and loved ones.