Money management is something everyone must do all the time to keep themselves financially stable. It’s a crucial skill to have as an adult and the best time to teach someone this skill is when they are young.
If you are a parent of a teenager then this is the perfect time to teach them about money management and possibly open a checking account for them. However, you might be wondering What Is The Best Checking Account for My Teen? If that’s the case, keep reading because we’ve compiled some information to help you select the best checking account for your teen as well as recommend some of our favorites.
Editor’s Note: If you’re searching for a fantastic student account, see our review of the Chase College Checking account.
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Checking Accounts for Teens
Although we don’t write as many checks as we once did, teens can still make use of checking accounts to obtain a debit card to make any purchases they might need. A checking account is a safe bet for teens rather than a credit card because it helps them keep track of their spending and to always leave some sort of cushion for mistakes.
Generally, the cost of bouncing a check is about $30 plus any additional fees that the merchant might charge. This amount is a lot of money to adults, so it’ll be even more for teens that may be working a part time and/or minimum wage job.
Luckily for teens, most accounts actually have overdraft protection, so if you spend more money than you have in your account, you can still make that transaction, but there will be a small fee that you must pay later. This is good because it will save any inconvenience that occurs or any embarrassment that your teen may feel getting their card declined. Keep in mind that transactions charged that are overdrafted will come with a fee that is usually on par with bouncing a check.
To avoid this issue many parents will make it so that their teen’s card gets declined to avoid any of the fees. To halt your overdraft protection, simply contact your bank to discuss the issue. If you do want to allow your teen to spend money past their checking account amount, you may link their checking account to their savings account or a credit card. This will allow the bank to transfer funds to their checking account when it is low on funds. The transfer fees between accounts tend to be much lower than the fees charged for over drafting.
Teaching Teens How to Save Money
If you end up linking their checking account to their savings or a credit card, will that help them or hurt them? Having a larger supply of money can be tempting and your teen may use it without thinking about it. When you decide to open up a checking account for them, think about what you plan to achieve with this milestone. Is your teen working or do they get an allowance? Do you plan on putting a percentage of their income into a savings account or putting limits on how much they can spend?
Although debit cards can make it very easy to spend money, they are still a great option to help you track expenses made by that card. A large number of adults wonder where their kid spends their money and why it’s always such a large amount. With the printout available to them, it is much easier to figure that out. Cardholders will then be able to decide whether they’re happy with their current spending habits or whether they need to make some changes.
Best Way to Save Money with a Checking Account
Once you’ve decided to open an account for your teen, you need to figure out what the best option is to suit you and your teen’s needs. Here are some things you should look for:
- Minimum balance. Most banks will charge a checking account if it falls below a specific minimum balance. Make sure you teen has enough money saved up to open the account or else you might have to put some of your money into the account to avoid any fees, and that might tempt your teen to spend the money.
- Interest rates. Naturally, you’re going to want the highest interest rate you can get for your teen, but they are all so low on checking accounts that it mostly won’t make a difference. Interest rates on savings accounts nowadays are around 1%, and checking accounts are even less than that.
- Fees. Be sure to see what types of fees banks will charge on checking accounts. Otherwise, overdraft protection, low balance fees, and ATM usage fees will end up chipping away at your teen’s account.
Money management is a difficult skill to learn, so it is best to start your teen off early to avoid any issues later down the road. Some takeaways I would recommend from this post is to make sure you find an account that will suit all your teen’s needs and to make sure none of the fees are too high, since they are just starting off.
If you’re looking outside of your own banking network for your child, check out our list of the Best Bank Rates! If you like posts like this, be sure to check out our list of the Best Student Checking Accounts and the Best Bank Promotions, here on HMB!