How to handle money is an important life lesson. The sooner you start your child’s financial education, the more knowledgeable and responsible they will be with their money. Opening a checking account for your child is a great way to impart real-world money lessons.
Programs for kids
Seek out a financial institution or inquire at the one you are currently using about accounts and programs specially designed for kids. These accounts often mimic features of traditional accounts but offer you important oversight. According to Investopedia writer Jeff Krohnfeldt, accounts with parental controls let you see how your kid is handling their money by sending text alerts or setting ATM, debit card transaction, or withdrawal limits. These controls enable you to step in when problems pop up.
“By utilizing banks that have teen programs, parents can help their child to establish a banking and a credit history while still under their roof,” reports The Balance writer Madison Dupaix.
If your financial institution does not offer programs with parental control features, and you do not want to open an account at a new institution, put your name on your child’s account. As a joint account holder, you will have complete access to and knowledge of your child’s account, according to Krohnfeldt.
Once you have chosen the right account for you and your child, the real money decisions begin. First, determine how you want your child to use the account, advises Forbes contributor Ben Gran. Is there a certain percentage from their allowance they need to deposit each month? Are they saving money for something special like a computer or bike? Are they responsible for funding certain perks like having a cell phone?
Although many people do not write out physical checks very often anymore, it is still a skill your child should have. Explain how to fill out a check and record the transaction in the account register. If your child receives a check as a birthday or holiday gift or from their place of employment, show them how to endorse the check, fill out the deposit slip and complete the transaction at your financial institution. Guiding them in setting financial goals is essential.
Online banking functionality will no doubt be part of your child’s checking account. If an employee at the financial institution does not walk you and your child through its app, be sure to help your child set up their online profile, choose a secure password and investigate all the online features available with the account. Teach your child how to read their banking statement, too, and stress the danger of overdrafts. Finally, if you are allowing your child ATM privileges, walk them through the transactions they can complete, the amount they are allowed to withdraw, and how to safely use the machine.
A bank account offers your child an active role in their financial future. It serves as a secure way for your child to save money while also providing them a lesson in balancing what they save and what they spend. If you are a joint account holder or have set parental controls on the account, you can continue to teach your child lessons in finance as they grow.