When I asked parents what life skills they want their children to understand, the most common response was that they want them to learn how to create a bank account.
Similarly, there was a strong demand for:
How to budget and balance your books
How to make a check and pay your bills
Also, how do you begin saving for retirement?
As a result, it appears that some of the things we take for granted are lacking from what we teach children.
The best and simplest approach to get started with opening a bank account will be discussed in this article, which is the first in a four-part series.
It may appear simple, but there are a few questions that few people consider, which we'll discuss in this article:
Which bank is it?
Which is better: a checking or a savings account?
Are there any fees or minimum balance requirements?
Is it necessary for me to get a debit card as well?
Should I put my name on my child's account?
1. Selecting a Financial Institution
When it comes to choosing a bank, there are a few things to consider:
Location
The total number of branches
Accessibility
The site should be close to your home, but there should also be enough branches so that you can go to your bank in an emergency.
When I was a student at CU Boulder, I opened an account with Elevations Credit Union. It was convenient, and credit unions are fantastic places to bank. After I graduated and moved, however, there were no branches in the area, which made things quite inconvenient. I decided to create an account with US Bank because they are located in nearly every King Soopers where I shop for groceries.
This is especially crucial when it comes to children, as you don't want them to have to drive too far just to go to the bank.
Similarly, it is critical to have easy access to the branch. I used to have a Norwest (now Wells Fargo) account, and I recall how difficult it was to get into and out of the bank's parking lot. I'd been in several close calls with cars and dreaded even going to the bank.
2. Savings or checking account
There should be a separate account for saving and investing, as you'll discover in a future lesson about saving and budgeting.
That means having both a checking and a savings account is critical.
The purpose of a checking account is for children to learn how to write checks and to have a separate spending account from their savings account.
Checking accounts are necessary for paying bills (whether online or by mail) and will teach children how to make checks. Check writing is still necessary, even if it isn't as common as it once was.
One day, I was out shopping and discovered I had forgotten my wallet, which included my credit cards and cash. I began to feel anxious because I was hungry. Thankfully, I keep a few checks in the car and was able to save myself by writing a check... they're still useful!
3. Fees and Requirements for Minimum Balances
Some banks charge a fee for opening an account, while others do not. Obviously, since your child shouldn't have a large account, choose the one that doesn't. Also, make sure there isn't a minimum balance or one that is really tiny ($10 or less).
How overdrafts are managed is just as essential!
My colleagues (who hadn't learned how to balance an account) would often activate their overdraft protection and the expensive fees that came with it when I was in college.
They would check their balance online and see that it was $10. Then, a few days later, they'd check it again, and it was at $30.
They never pondered where the extra money came from because it was the magical expanding bank account. Until they had over $200 in overdraft protection fees at the end of the month!
Instead of purchasing overdraft protection, I would advise them to make sure they can balance their account (which we'll discuss in a future article).
4. Have You Considered Using a Debit Card?
Here's how I feel about kids having debit cards: it makes it much more difficult to keep track of money while also making it more easy to overspend and get into problems.
Are ATM machines useful? Yes, but throughout my entire life, I have never used one. Preparation is one of the life skills that should be taught to children. In my car, I keep an extra $10 in cash and a couple checks. If it was taken, it wouldn't concern me.
If you insist on giving your child a debit ca
rd, wait at least six months after they open their account so they may learn "the old-fashioned way" and comprehend how the debit card will influence their account when they use it.
5. Should I Be Added To The Account As Well?
I think it's a good idea for you to be on your child's first account so you can keep track of their spending and prevent a financial disaster.
It's beneficial to obtain statements so that you may go over them with your child and teach them how to properly dispose of them (in a shredder) in order to reduce their risk of identity theft.
Set a deadline or set benchmarks for when you will remove yourself from the account and hand over responsibility for a separate account to your child.
For children, opening a bank account is a significant step into a new world, and it should be a positive experience. Take your kids through the setup process and search for opportunities to learn along the way.
Equip your children with financial knowledge and tricks...
0 Comments