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Financial Skills - Opening a Bank Account
I used to be surprised once I asked mother and father to tell me the life skills they need their kids knew, and there was a powerful request for kids to learn to open a bank account.
Equally, there was an enormous call out for:
How you can finances & balance accounts
Methods to write checks and pay bills
And find out how to start saving for retirement
It seems among the things we take for granted are, in consequence, missing from what we teach kids.
This article is the first article in the 4-part series and will discuss one of the best and simplest way to get started with opening a bank account.
It appears easy, but there are a number of questions many people by no means think of that we'll address in this article:
Which bank?
Checking or savings account?
Are there fees or minimum balances?
Ought to I get a Debit Card too?
Ought to I have my name on the account with my kid?
1. Choosing a Bank
If you select a bank, there are just a few criteria you'll want to look at:
Number of branches
Ease of access
The situation ought to be handy to your private home, but also have enough branches so that - in the case of an emergency - you can get to your bank.
I opened an account with Elevations Credit Union when I was attending CU Boulder. It was handy and credit unions are really great to bank with. Nonetheless, after I graduated and moved, there have been no branches round me, which made things very inconvenient. I ended up opening an account with US Bank since they're in about each King Soopers, where I do my grocery shopping.
This is very important with kids because you don't want them to have to drive too far just to bank.
Equally, ease of access into the branch is important. I bear in mind having a Norwest (now Wells Fargo) account, and getting out and in of the bank's parking lot was terrible. I had several close to-miss car accidents and dreaded even going to the bank.
2. Checking or Financial savings Account
As you may learn sooner or later article about saving and budgeting, there ought to be an account that's used for saving and investing.
Meaning it's necessary to have BOTH a checking and savings account.
The reason a checking account is vital, is in order that kids can learn to write checks, and have a designated spending account aside from a designated savings account.
Checking accounts are necessary for paying bills (be it on-line or via mail) and will give kids the opportunity to discover ways to write checks. Even when check writing is not as prevalent as it as soon as was, it's still important.
I used to be shopping in the future and realized I forgot my wallet, which had my credit cards and cash. I started to panic because I wanted some food. Thankfully, I keep a couple of checks in the automotive and was able to avoid wasting myself by writing a check... they still turn out to be useful!
3. Fees & Minimal Balances
Some banks have fees to have an account and others don't. Obviously get the one that does not since your kid should not have an enormous account. Likewise make positive there isn't a minimum balance or a really small ($10 or less) minimal balance.
Just as important is how overdrafts are dealt with!
Once I was in college, it never failed: my friends (who hadn't learned methods to balance an account) would routinely set off their overdraft protection and the hefty fees that went alongside with it.
They might look at their balance on-line and it would show $10. Then they'd check it again just a few days later and it was at $30.
It was the magical growing bank account; and so they by no means wondered where the additional cash came from. Until the top of the month once they had over $200 in overdraft protection fees!
I'd recommend NOT getting overdraft protection and instead making darn positive they can balance their account (which we'll cover in a future article).
4. What A couple of Debit Card?
Here's my thoughts on kids having debit cards: it makes it a lot, a lot harder to balance the bank account while making it a lot simpler to overspend and run into trouble.
Are ATM machines handy? Sure, but I have by no means once used one in my entire life. Part of teaching kids life skills is to show them to be prepared. I keep an additional $10 in cash plus a couple of checks in my car. It wouldn't hassle me if it received stolen.
If you're decided that your kid gets a debit card, wait no less than six months after opening their account to allow them to learn "the old fashioned way" and understand how the debit card impacts their account when they really start utilizing it.
5. Should I Be On The Account Too?
I think it's a very good concept so that you can be on your kid's first account so you possibly can monitor their spending and make sure they don't cause a train wreck.
It is good to get statements so to use that as a learning experience to go over them with your kid and educate them the way to properly get rid of them (in a shredder) in order that they lower their risk of identity theft.
Come up with a time frame or benchmarks till you pull your self off the account and let your kid take on the responsibility of a person account.
Opening a bank account is a large step right into a new world for kids and it must be a fantastic experience. Walk your kids by way of the setup and look for the learning opportunities along the way.
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