When Should Your Teen Start a Checking Account?
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Think back for a second. Your child was two or three, jabbering away at the dinner table and they reach across and grab your knife.
Yikes! They’re not ready for that.
But, as time went on, they were allowed a kid’s butter knife. And then they were allowed a real plate with a grownup butter knife, until one day they were allowed to cut their own steak with their own steak knife.
That transition didn’t happen overnight. No, it was years of helping them understand the purpose of the knife and the dangers of using it incorrectly.
Now, we’ve heard for years the phrase: “I don’t trust my kid with a checking account.” We aren’t going to argue, you know your child best, but don’t forget that there was a time you didn’t trust them with that knife at the dinner table either.
Maybe today your teen isn’t ready to have a debit card as they head out to the movies with friends.
But, that day is coming.
Your first checking account and debit card is just another pivotal moment in life. No longer are you having to stash away birthday cash into a piggy bank or under the mattress. Instead you have a secure place to save and spend.
It’s important to start teaching them now the purpose of a checking account, how to properly handle a debit card and the risks that come with overspending and not budgeting. Otherwise, they’ll go off to school or start their new job and have no idea how to save for things they need, pay bills on time or plan ahead for things they really want.
How do you get started?
- We recommend teens begin their first checking account around the age of 14, or at least a year before they get their first job. Understand that many of our 16 year old customers are getting jobs and employers are asking them about direct deposit. Use that time before job number one to set up the account . They’ll begin to feel comfortable with it before they have more money at their disposal.
- Start having money conversations with them. Ask things like:
- How much of my paycheck do you think goes to pay for taxes?
- Let’s say you’re 25, what would be your first step before you purchase something new?
- How much money do you think your dream job makes on average?
- What’s one thing you’d love to do or buy before the end of the year?
- Open the account with them and monitor it regularly. Teens need a legal guardian to open the checking account with them.
- Discuss and set boundaries for how and when they will be able to use their debit card. Will they be responsible for any bills they need to budget for (Car insurance? Car payment? Gas? School extracurriculars?) How often will you monitor the account? Will you have alerts set up to help you monitor it? Do you expect them to save so much of each paycheck? Discuss all of these items and more so they understand what is expected of them as they take on this new responsibility.
Trusting your child to use a steak knife didn’t happen without a few mishaps. And neither will trusting your teen with a checkbook and debit card. It’s a new responsibility that will take some discussion, questions and correction at times. When mistakes happen, and they will happen, help them understand how they could have managed their money a little more responsibly. It’s much better for them to learn these lessons now, rather than when they’re 30 and they don’t realize they’re overextending themselves with the house or car they’ve just purchased. Teach them now and they’ll thank you later (probably much later, I mean they are teenagers after all…)