I was amazed when I asked parents to tell their children the life skills they would like to know, and I was made a huge request to learn how to open a bank account for kids.
There was also a great call:
- How to budget and balance accounts
- How to write checks and how to pay bills
- And how to start saving for retirement
Some of the things we take for granted seem to be missing as a result of what we teach children.
This article is the first in a four-part series and will cover the best and easiest way to start opening a bank account.
It sounds easy, but many people never think about the many questions we will address in this article:
- Which bank?
- Check or savings account?
- Is there a minimum rate or balance?
- Do I also need to get a debit card?
- Do I have to consider my name with my child?
1. Choosing a bank
When choosing a bank, you want to consider a number of criteria:
- Number of branches
- Easy access
The location should be convenient for your home, but it can have enough branches in case of an emergency to get to your bank.
When I moved to CU Boulder I opened an account at Elevations Credit Union. It was convenient and the credit unions are very well banked. However, after graduating and changing, there was no branch around me which made it very uncomfortable. I ended up opening an account at US Bank because they are all King Soopers when I shop for food.
This is especially important with kids because you don’t want them to have to drive too far to the banks alone.
Ease of access to the branch is also important. I remember I had a Norwest (now Wells Fargo) account, and it was awesome to get in and out of the bank parking lot. I had a lot of lost car accidents and was also afraid to go to the bank.
2. Check or Savings Account
As you will learn in the future article about saving and budgeting, there should be an account used for saving and investing.
This means having both a current account and a savings account.
This is the reason for the importance of a checking account so that children can learn to write checks and have an expense account designated as a savings account.
Check accounts are important for paying bills (online or by mail) and will allow children to learn how to write checks. Although check writing is not as common as it once was, it is important.
One day I was shopping and I realized I had forgotten my wallet, it had credit cards and money. I started to panic because I needed some food. Luckily, I keep a couple of checks in the car and was able to save them by writing a check … they come in handy!
3. Fees and minimum balances
Some banks have fees to account for and others do not. Of course, what you don’t get doesn’t have to be a huge account for your child. Also, make sure there is no minimum balance or very small balance ($ 10 or less).
It’s important how overcrowding is handled!
When I was in college, it never failed: my classmates (who didn’t learn how to balance an account) would have their own overdraft protection and the high fees that came with it.
They would look at the balance online and show $ 10. Then they would check again a few days later and it was $ 30.
It was a magical bank account that was growing; and they were never asked where the extra money came from. By the end of the month there were over $ 200 in overdraft protection fees!
I would suggest NOT getting any overdraft protection and instead make sure they can balance the account (we’ll look at that in a future article).
4. What about a debit card?
Here are my thoughts on children with debit cards: It’s much harder to balance your bank account while making it easier to spend and find problems.
Are ATMs convenient? Yes, but I’ve never used it in my entire life. It is about teaching children how to prepare a part of life skills. I save $ 10 more in cash and some checks in my car. I wouldn’t mind if they stole it.
If you determine that your child will get a debit card, wait at least six months for them to open an account and then learn the “old-fashioned way” and understand how debit cards affect them when they actually start using their account.
5. Do I have to be careful too?
I think it’s a very good idea to keep your child’s mind first so that they can control their expenses and make sure they don’t cause a train wreck.
It is good to receive statements so that you can use this as a learning experience to go with your child and teach them how to dispose of them (in a shredder) so that they reduce the risk of identity theft.
Come up with a time slot or reference points to take out of your account and let your child take charge of the individual’s account.
Opening a bank account is a big step towards a new world for children and should be a great experience. Walk your child through the setup and look for learning opportunities along the way.