As kids get older, their trusty old piggy bank may not be the best way to establish financial stability. It just may be time for a bank account.
Having a checking account will help give your child a better sense of their money, especially where it’s going and how quickly it can disappear. Where once money was not of much concern to them (thanks to Mom and Dad), money will have a completely different meaning. Here are five reasons why opening a checking account can be sound financial advice.
While you may be required to be listed on the account as a joint account holder, your teen is still able to make financial decisions about their money. He will learn about the importance of balancing the account and not overspending. It’s also a great way for teens to learn such skills as how to read a bank statement or balance a checkbook.
Place for earned money
As teens enter the workforce, they’ll realize they’ll need a parent to cash their paycheck. New banking regulations are making it increasingly difficult for a parent to deposit a check with a teen’s name on it without a lengthy hold period. In most cases, a teen with a checking account is able to deposit the check without a hold and gain access to the funds immediately.
Saving, savings, savings
Some bank accounts offer incentives for saving money, such as special interest rates for teens. This is a great way to teach teens the importance of saving for a rainy day. Studies have shown that teens who save money in a savings account are more likely to save money as adults, so it’s a great habit to start.
Don’t always be so quick to bail out kids when they overspend. It’s important to let teenagers see the consequences of not budgeting properly while they’re still young. Also, don’t give in to their requests or demands for money. Instant gratification is a major problem for many adults with money problems.
Pay by check
Even though we live in a mostly digital world, the art of writing a check still has value. Encourage check writing by having your child pay for such things as their cell phone or car insurance bill by check every month. Like their debit card, they’ll learn to keep track of money, as well as learn how to pay bills.