Teens & Money: Checking & Savings Accounts
In this day and age, parents have left most of the child education responsibilities to schools and teachers. However, one subject remains untouched. Financial know-how is not taught in schools, thus when kids grow up and go to college they end up living in debt.
Parents may have taught their kids how to spend wisely when shopping or even how to save cash on a piggy bank when they were small kids. Now that the kids are all grown and are now teenagers, the information should be upgraded to new ways of making money and managing it. This is where the idea of teaching your teenage kids about checking and savings accounts comes in.
Parents should first of all sit down with their kids and give them detailed information about a savings account. They should be made to understand that a savings account is one that does not have a debit card or check attached to it. As a result spending money from a savings account is rather difficult. Teens should be taught that when it comes to looking for the most ideal savings account, interest rates are the determining factor. This means that as the money is saved on the account, it tends to accumulate interest based on the percentage agreed upon on opening the account. This policy works in such a way that the more money that is saved, the greater the level of interest accumulated at the end of the day.
It is important to research on the different types of savings accounts before settling for any particular one. For instance a regular savings account would earn interest on a monthly basis and most definitely limits the number of withdrawals a teen can make in a month. Depending on the bank, there could be a fee for monthly maintenance. On the other hand there are other accounts referred to as CDs, which do not allow the teens to withdraw the cash within a stipulated period of time; it could be six months or even one year. Penalties are charged by banks for making withdrawals from the CDs before the stipulated period is complete. There are also the money market accounts that come with higher minimum balances and more limits on the number of withdrawals, but offer the benefit of higher interest rates than the other savings accounts.
For checking it is important to carry out a research with your teen on the different banks and their checking accounts. At the same time, a good number of banks come with teen-specific checking accounts and tools that would help your teen learn how to bank from scratch. At the same time such features would help the teens in matters like comparing terms such as monthly fees and ATM fees. You should open a checking account for your teen that features a debit card as well as checks. Teach your teen how to write a check but at the same time make him/her understand that checks are not funds. They should also be made to understand that they should not write a check if they do not have the required funds in their accounts, otherwise they are likely to incur some charges or penalties.
There are a number of key points that the teens should also be taught as they open their checking accounts such as how to balance a check book, that a debit card is not limitless, how to deduct the debit card purchases the same way and even how to record the deposits. On the other hand when opening a savings account it is essential to ensure that you sign up for automatic funds transfer. Once this is done, funds would be automatically deducted from the checking account into the savings account.