Similarly, there was a large demand for:
Budgeting and Account Balance
How to Write a Check and Pay Your Bills
How to Begin Saving for Retirement
Some of the things we take for granted appear to be missing from what we teach children as a result.
This is the first of four articles that will discuss the best and simplest way to get started with opening a bank account.
It appears simple, but there are several questions that many people do not consider, which we will address in this article:
Which bank is it?
Is it better to have a checking or a savings account?
Are there any fees or minimum balance requirements?
Should I also get a Debit Card?
Should I put my name on my child's account?
1. Selecting a Bank
When selecting a bank, you should consider the following factors:
The total number of branches
The location should be close to your home, but there should also be enough branches so that you can get 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 excellent places to bank. However, after I graduated and moved, there were no branches nearby, making things extremely inconvenient. I ended up opening an account with US Bank because they are in almost every King Soopers where I shop for groceries.
This is especially important when it comes to children because you don't want them to have to drive too far just to go to the bank.
Similarly, ease of entry into the branch is critical. I had a Norwest (now Wells Fargo) account, and getting into and out of the bank's parking lot was a nightmare. I'd been in several car accidents and dreaded even going to the bank.
2. Savings or checking account
There should be a savings and investing account, as you will learn in a future article about saving and budgeting.
That means you should have both a checking and a savings account.
A checking account is necessary so that children can learn how to write checks and have a designated spending account in addition to a designated savings account.
Checking accounts are useful for paying bills (whether online or by mail) and teach children how to write checks. Check writing is still important, even if it isn't as common as it once was.
I was out shopping one day when I realized I had forgotten my wallet, which contained my credit cards and cash. I began to panic because I was hungry. Fortunately, I keep a few checks in my car and was able to save myself by writing a check... they're still useful!
Fees and Minimum Balances
Some banks charge account fees, while others do not. Obviously, choose the one that does not, as your child should not have a large account. Similarly, ensure that there is no minimum balance or a very small ($10 or less) minimum balance.
Overdraft management is equally important!
It never failed when I was in college: my peers (who hadn't learned how to balance an account) would routinely trigger their overdraft protection and the hefty fees that came with it.
When they checked their balance online, it showed $10. They'd check it again a few days later, and it was still at $30.
They never wondered where the extra money came from because it was the magical growing bank account. Until the end of the month, when they had overdraft protection fees totaling over $200!
I would advise against getting overdraft protection and instead ensuring that they can balance their account (which will be covered in a future article).
4. Do you have a debit card?
Here are my thoughts on giving children debit cards: it makes it much more difficult to balance the bank account while also making it much easier to overspend and get into trouble.
Are ATM machines useful? Yes, but in my entire life, I have never used one. Being prepared is part of teaching children life skills. In my car, I keep an extra $10 in cash and a few checks. I wouldn't mind if it was stolen.
If you insist on giving your child a debit card, wait at least six months after opening their account so they can learn """"the old fashioned way"""" and understand how the debit card will affect their account once they begin using it.
5. Should I be added to the account as well?
I believe you should be on your child's first account so you can monitor their spending and ensure they don't cause a train wreck.
It's a good idea to obtain statements so that you can go over them with your child and teach them how to properly dispose of them (in a shredder) to reduce their risk of identity theft.
Set a time frame or benchmarks for when you will remove yourself from the account and hand over responsibility for an individual account to your child.
For children, opening a bank account is a huge step into a new world, and it should be a fantastic experience. Take your children through the setup process, looking for learning opportunities along the way."""