I was amazed when I asked my parents to tell me about the life skills they wanted their children to know, and the children were asked to learn how to open a bank account.
Again, there is a huge appeal:
- How to budget and balance accounts
- How to write a check and pay a bill
- And how to start saving for retirement
As a result, it seems that some of the things we take for granted are lost in the process of teaching our children.
This article is the first in a four-part series and will discuss the best and easiest way to start a bank account.
It seems easy, but there are a number of issues that people have never thought of, and we will address them in this article:
- Which bank?
- Check or savings account?
- Is there a fee or minimum balance?
- Should I also get a debit card?
- Should I have my name on my child's account?
1. Choose a bank
After choosing a bank, you need to consider the following conditions:
- Number of branches
- Transportation network extending in all directions
This location should be convenient for you to get home, but there are also enough branches to go to the bank in an emergency.
When I joined CU Boulder, I opened an account with Elevations Credit Union. This is very convenient, and the credit cooperative is really worthy of bank support. However, after I graduated and moved, there were no branches around, which caused great inconvenience. I ended up with an account at Bank of America because they were all over my king Sopers shopping at the grocery store.
This is especially important for children because you don't want them to drive too far to drive.
Also, easy access to branch offices is also important. I remember having a Norwest [now Wells Fargo] account, and getting in and out of the bank parking lot was terrible. I have had several accidents and I didn’t even dare to go to the bank.
2. Check or savings account
If you're going to learn about savings and budgeting in a future article, you should have an account for saving and investing.
This means that having both a check and a savings account is important.
The reason the checking account is important is that children can learn how to write a check and have a designated spending account in addition to the specified savings account.
Checking accounts are important for paying bills [online or by mail] and will give children the opportunity to learn how to write checks. Even if the check is not as common as it used to be, it is still important.
I shopping one day and realized that I forgot my wallet with my credit card and cash. I started panicking because I needed food. Fortunately, I saved a few checks in the car and saved myself by writing a check… they still come in handy!
3. Fees and minimum balance
Some banks have to pay to open an account, while others do not. Obviously got one because your child should not have a huge account. Again, make sure there is no minimum balance or a small balance [$10 or less].
Equally important is how to handle overdrafts!
When I was in college, it never failed: my peers [who didn't learn how to balance their accounts] routinely triggered their overdraft protection and the high costs that came with it.
They will check the balance online and display $10. A few days later, they checked the balance again, and the balance was $30.
It was a magical growing bank account; they never thought about where the extra money came from. Until the end of the month they had over $200 overdraft protection fees!
I don't recommend getting overdraft protection, but make sure they can balance their accounts [we'll cover them in a future article].
4. How about a debit card?
This is my thoughts about children with debit cards: this makes it very difficult to balance bank accounts, and it also makes it much easier to overspend and get into trouble.
Is the ATM machine convenient? Yes, but I have never used it in my life. Part of teaching children's life skills is to teach them to prepare. I kept an extra $10 in cash and a few checks in the car. If it is stolen, I won't bother.
If you're sure your child has a debit card, wait at least six months after opening an account so they can learn the "outdated way" and understand how the debit card will affect their account when they actually start using it.
5. Should I open an account?
I think this is a very good idea for your child so you can monitor their expenses and make sure they don't cause a train accident.
It's a good habit to get a statement so you can use it as a learning experience to accompany your child and teach them how to handle them correctly [shredded] to reduce the risk of their being stolen.
Make a time frame or benchmark until you opt out of the account and let the child take responsibility for the individual account.
Opening a bank account is an important step for the kids to move into the new world and should be a great experience. Guide your child through the setup and find learning opportunities in the process.