Kids & Money: Teen Checking Accounts

by Mary E. McCraw, CFP®

April is always a big month in our house as we celebrate our twin girls’ birthday. This year was a particularly big month as they turned 13 and we now have two teenagers in the house. As I look back over the milestones in our parenting life, every phase comes with its unknowns and has turned out to be much less terrifying than I initially expected. We survived the sleep deprived baby twin phase, survived (barely) the potty training toddler phase and have adapted to each new challenge parenting has thrown our way.

One big transition with turning 13 in our house was opening checking accounts for our new teens. Six years ago, at age 7, our girls had saved enough allowance in their “savings jars” to be able to open their very own savings accounts. At the time, we took them to a small local bank where they could make deposits in person and meet the banker. As our schedules became busier and they were more comfortable with technology, we transitioned them to an online bank (Capital One) to maximize the interest they earned on their savings.

Up to this point, I have managed their banking for them – depositing any checks they received and transferring funds as needed between our main checking account. They periodically would use some of their savings to buy a toy, a book or souvenirs while on vacation. We covered all their necessities and this was purely their fun money. I am happy to say that they have used the accounts very responsibly, letting their allowance and gift money grow while they made thoughtful spending decisions. It has been a good exercise in delayed gratification and responsibility.

Now they have a budget . . .

Now that they are 13, the responsibility component is ratcheting up a bit and they will now be responsible for some necessary purchases. We decided to start with their clothing budget. We will now transfer our normal budgeted amount into their checking accounts and they will manage those purchases. Since their savings accounts were at Capital One, we opened them each a “MONEY” account at Capital One. This is a joint checking account with a parent as the primary owner. The teenager gets a debit card for spending, but since this an online account there are no checks issued.

. . . and an app

Each girl has the Capital One app on their phone (with a very secure password), so they can see their balance. They each received checks (made out to them) for their birthday, so they were able to immediately get practice making a mobile check deposit. Their accounts, both checking and savings, are also on my Capital One app, so I am able to monitor the accounts.

To be honest, my girls are a bit nervous about this new level of responsibility. This is a small step towards them one day being able to be completely independent. Our plan is to slowly add categories of expenses for which they are responsible, so that by the time they are 16 car insurance and gas is no big deal for them. By the time they are 18, the goal is that they can manage their finances independently and not succumb to tempting credit card offers.

Bottom line is to start early

Teaching basic financial concepts early can minimize the common but costly financial mistakes kids often make when they leave home. Mistakes happen, but a mistake with a $200 clothing allowance is not nearly as devastating as racking up credit card debt down the road. I am also setting them up with an electronic budgeting app, which will help them with their savings and giving goals at the same time as managing these necessary expenses.

There are many banks out there that allow you to set-up a checking account for a teenager. I would recommend starting with your current bank(s) to see if there a good option for your situation. For us, we are very comfortable with online banking so Capital One made sense. We are hoping the hands on experience starting at a young age will give them a greater sense of control and prevent financial pitfalls that affect so many young adults.

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