If your child has a lot of allowance piling up or if they've recently started earning money by working a job, a bank account can help them learn how to better manage their money and introduce them to the ins and outs of maintaining a bank account. Here are a few guidelines to follow when opening your child's first banking account:
1. Explore All Your Options
Today's banks offer an assortment of accounts suitable for individuals under 18 years of age. Since your child is under 18, they will need you to be a joint owner for the account. If your child is fairly young and won't be spending the money in their account for a while, a savings or money market account are smart alternatives. Both of these accounts will enable your child to earn interest on their money.
If your child is older or if you need to be able to make frequent withdrawals from the account, a checking account may be a better fit. See if your bank offers an account geared towards minors; these accounts often have minimal fees and tools that help inexperienced youth customers learn how to improve their money management skills.
2. See What Features You Can Use to Stay in the Loop
As a joint account holder on the account, you want to know how your child is managing their money. See what features a prospective account offers to help keep you informed of your child's spending.
For example, you might want an account that sends you a text message or an email when the balance in the account drops below a certain amount or when a transaction is completed for more than your specified amount. You may want to receive a weekly summary that shows how money in the account is being spent. Online banking is another useful feature you can use to monitor your child's spending.
3. Set the Account Up So Your Child Can't Overdraw It
Unfortunately, most people with a bank account have overdrawn their account at some point. Children who are just learning about banking and money management are even more susceptible to inadvertently spending more than the balance in their account. They might think that if their debit card works, then that means they have money, not understanding that some banks permit over-drafting as a courtesy. When you open the account, make sure that the banker sets it up so that transactions will be declined if your child doesn't have the funds in their account to cover them.