Checking accounts provide teens with crucial hands-on financial training. The challenge is scouting out those accounts offering low fees or no fees, along with opportunities for parental monitoring and tools for education. But taking the time to shop for the right account could provide a big payoff later: fiscally responsible adults who have mastered basic money management skills.
More banks are offering teen checking beginning at age 13. Typically, the parent is the co-owner with full access to the account, much like a joint account. For example, Wells Fargo's Teen Checking accounts give parents full access to alerts, parental controls and their child's accounts. Chase also offers its jointly owned High School Checking accounts.
"Checking accounts help teens monitor and record their money and spending," says Tanya Breeling, a vice president at Young Americans Center for Financial Education in Denver. "It's one form of a spending plan because you have to track your money to the penny. It's a safe environment with someone teaching."
Comparison shopping for the right bank is important, though. Breeling especially likes banks that engage teens face to face. "Credit unions have a community-oriented mentality," she says. "That may be a great source."
But no bank can make up for no-show parents. "Training should come from the parent and the child," she says. "The bank provides the materials, and parents reinforce them at home."
Navigating debit cards is the trickiest part. Johanne Wayne, who introduced her four children to teen checking, is wary of debit cards. "It's easy to go to zero really fast," she says. Her solution was to hold her children strictly accountable every time they used their card. She quizzes them on why it was used, where, the cost and where the money came from.
"You can wean them into that product (debit cards)," says Breeling. "There are checking accounts that only allow checks."
Here are five things to keep in mind when hunting for the right teen account:
Read the fine print
Look for minimal fees, says Breeling, who also advises parents to use the search for low fees as teachable moments for teens.
Use education tools
Some banks offer online tools that help train teens. Wells Fargo's Teen Checking accounts come with online tools and education primers, such as its Getting Started Guide. "It's about all the aspects of the account, such as withdrawing money," says Erin Constantine, product management manager at Wells Fargo. There's also a Wells Fargo-sponsored education site for teens at HandsOnBanking.org.
Breeling recommends trying out online tools such as Facebooks's My Money application. Teens can monitor their finances via a Facebook page. "There are great ways for teens to track money,"
Monitor the process
Viewing teen accounts online is the easiest way for parents to monitor usage, says Breeling. She advises scrutinizing teen accounts weekly or monthly, depending on the child. At Wells Fargo, parents have full access to their teen's bank account. They have their own logins and can view their children's accounts, including transaction history. Alerts vary, such as for balances or withdrawals. "You do want to give kids a little leeway," says Breeling.
Wayne trained her kids in checking account basics with a set of exercises using ledgers. She gave them a list of fictional expenses to start deducting. "In the teen years, you need to be more of a mentor than a parent," she says. "Give them room to fail." The teens also reviewed their finances online.
Accountability and setting limits work well with teens. And many accounts let you keep ratcheting up limits as teens prove their responsibility. For example, Union Bank in San Francisco lets parents set parameters for their Teen Access accounts. "Getting checks is up to the parent," says Pierre Habis, a retail branch banking executive at Union Bank. "So the parent can allocate checks to the child."
Union Bank also sets limits on debit cards. Habis advocates starting with $40 cash withdrawals. Move up the amount as the child becomes more responsible. Wayne also sets limits on her teens' ATM withdrawals. "We need to remind them that money doesn't come by accident," she says. "It's there for a purpose."
Pace your teen
Start your child out with a savings account first. "They get used to saving money," says Habis. "The next milestone is having access to a checking account. It's about setting habits, and then continuing to grow."