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You may have opened savings accounts for your children as a way to sock away money for college or to teach them about investing.
As they grow, however, they’re going to need to learn some other money basics and that includes managing a current account. According to www.bankrate.com, those skills may be more valuable today than ever before; 36 per cent of tertiary institution students at four-year institutions note that over-drafting and managing a bank account are the leading causes of financial stress, according to the 2015 Money Matters on Campus survey by education technology firm,EverFi and Higher One, a college financial services company.
Furthermore, 12 per cent indicate they never check their balances because they are too nervous.
Starting a current account early for teens is a key way to avoid pitfalls later.
“It helps them better learn concepts related to money and can give them valuable practice in a safe environment,” says Natasha Campbell, founder and CEO of Lifestyle Success Unlimited, a financial education company in Kissimmee, Florida.
Here, experts weigh in with strategies to help a teen open and maintain a current account.
According to www.bankrate.com, here are five tips on teen current accounts:
- Choose the right age
While many banks allow you to open a current account starting at age 13, the best time for your teen may coincide with other milestones, such as a getting a part-time job or learning to drive.
“Generally, what I look for is a level of responsibility that usually comes about six months after getting their driver’s licence,” says Christina Esterly, a Rio Rancho, New Mexico, mother who has helped her five children open current accounts. Look for signs that your child is able to hang on to a wallet or purse and not lose a driver’s licence.
Explain that a debit card connected to an account is the same as cash. For accounts geared toward 13- to 17-year-olds, you’ll be a co-owner of the account as a parent. This gives you the ability to view the account and set up limits and restrictions.
- Know what’s available
“There’s a wealth of information online,” says Ryan Bailey, a financial expert.
You’ll often find that student current accounts have lower fees or none at all. In some banks, for instance, students who open an account and are younger than 24 will pay no monthly maintenance fee and are not required to hold a minimum balance.
Check for features that will click with tech-savvy teens. “Banks try to push everything into an online presence,” says Valerie Magness, first vice president at Farmers & Merchants, California. Look for perks such as free direct deposit, mobile banking, e-statements and a debit card.
Some accounts will let you transfer money from your account to your child’s current account, making it easy to get money to your teen.
And if college is on the horizon, look for a bank that has a location on or near campus. “You’ll want to avoid ATM fees,” Bailey says. You can search for current accounts by city.
- Set it up together
If possible, link your child’s savings account to the new current account, advises Allan Prindle, president and CEO of Power Financial Credit Union in Miami.
Then, walk your child through the process of depositing money earned from jobs, birthdays or allowances to the account. Place some in savings for later and some in current account for spending.
Remember that while your child has watched you use a debit card for years, he or she may not fully understand how the transaction works. “Explain that a debit card connected to an account is the same as cash,” Campbell says.
Then, when your child uses a debit card, “track the transaction and watch the process,” suggests Prindle. Show how after the card is used, funds are deducted from the account. Hang on to the receipt until the transaction goes through.
If the bank allows you to deposit cheques through a smartphone or tablet, show your child the steps involved to take advantage of this feature.
Also, “teach your child the importance of never sharing account information with friends and to always use privacy measures when shopping,” adds Campbell.
- Monitor activity
Once your son or daughter grasps the basics of the transaction process, consider a strategy for online banking.
Most banks have apps for use on a smartphone or tablet. Show your child how to take 60 seconds every day to check the account balance.
Many institutions have a daily debit card limit for protection, notes Prindle. In addition to checking activity online, request text alerts if the account is low.
- Make it a learning process
A mother has set up a system in which her teens receive a stipend once every two weeks. From that amount, they need to cover gas, dining out, miscellaneous purchases and entertainment.
We also warned them if they overspent on some categories and didn’t have gas money, they’d have to do extra chores to earn more money or take it out of their savings account.
“There’s so much more technology available today than in the past,” Prindle says. “It’s refreshing to be able to have these limits and controls — you can let them do a few things, but now the account won’t go negative. If they lose the card, you can turn the card off. The technology is pretty neat.”
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