Good financial habits are learned young, and that includes saving and spending money. Parents may find that opening a savings account or checking account for their children teaches them how to handle their own money.
Here are some things for parents to think about:
Does your financial institution allow accounts for minors? Checking accounts are the issue here, as some institutions don't allow them because they require signing a contract. A parent would therefore need to cosign on an account and become the co-owner of it along with the teen.
Is your teen already financially responsible? If so, a savings or checking account may be an obvious choice.
Does your teen work? A working teen might benefit from a savings or checking account. If there is none, any paychecks earned would need to be cashed, and that can discourage saving.
Does your teen pay any bills? Some teens contribute toward car insurance, groceries, and other periodic expenses. Not only can a checking account help them pay these bills, but it leaves behind a payment history that reflects on them. This can benefit them if they want to get a credit card there in the future.
Do you want your teen to have an ATM or debit card? Are they responsible with their own money so that they don't drain their account quickly?
Is your teen saving for a car, college, or some other goal? If he or she is, a savings account can be ideal for keeping money stashed away.
If you've decided to open a checking account for your teen, what options do you want? An account with a low (or no) minimum balance requirement might be best suited for them until they've saved up enough to move to a more advantageous account (which might even pay interest or dividends).
A teenager should learn about all fees that apply to checking accounts, including ATM fees, account minimum fees, and overdraft fees. He or she should learn the pros and cons of overdraft fees. Early exposure to their sting can condition teens to learn good money skills.
Another thing to consider: many banks and credit unions have budgeting software and educational programs for teens who bank with them. Some offer prizes and other incentives to encourage good financial behavior.
Dive Deeper: Bank accounts 101: The full breakdown
This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.
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