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Financial Skills - Opening a Bank Account
I was shocked once I asked dad and mom to inform me the life skills they want their kids knew, and there was a convincing request for kids to learn how to open a bank account.
Similarly, there was a huge call out for:
Find out how to funds & balance accounts
How to write checks and pay bills
And the best way to start saving for retirement
It appears among the things we take without any consideration are, as a result, lacking from what we educate kids.
This article is the primary article in the four-part series and will discuss the best and easiest way to get started with opening a bank account.
It appears straightforward, but there are a number of questions many individuals by no means think of that we'll address in this article:
Which bank?
Checking or financial 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
When you select a bank, there are a couple of criteria you'll wish to look at:
Location
Number of branches
Ease of access
The location needs to be handy to your home, but additionally have sufficient branches in order that - within the case of an emergency - you may get to your bank.
I opened an account with Elevations Credit Union after I was attending CU Boulder. It was handy and credit unions are really nice 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 are in about each King Soopers, the place I do my grocery shopping.
This is very necessary with kids because you do not need them to need to drive too far just to bank.
Equally, ease of access into the branch is important. I remember having a Norwest (now Wells Fargo) account, and getting in and out of the bank's parking lot was terrible. I had a number of near-miss automobile accidents and dreaded even going to the bank.
2. Checking or Savings Account
As you will study in the future article about saving and budgeting, there should be an account that's used for saving and investing.
Meaning it's vital to have BOTH a checking and savings account.
The reason a checking account is important, is so that kids can discover ways to write checks, and have a designated spending account aside from a designated financial 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 at some point and realized I forgot my wallet, which had my credit cards and cash. I started to panic because I wanted some food. Fortuitously, I keep a couple of checks in the car and was able to avoid wasting myself by writing a check... they still come in useful!
3. Charges & Minimum Balances
Some banks have fees to have an account and others don't. Obviously get the one that does not since your kid shouldn't have an enormous account. Likewise make certain there isn't a minimal balance or a really small ($10 or less) minimal balance.
Just as essential is how overdrafts are handled!
When I was in college, it never failed: my friends (who hadn't learned find out how to balance an account) would normally trigger their overdraft protection and the hefty fees that went along with it.
They would look at their balance online 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 rising bank account; and they by no means wondered where the extra cash got here from. Until the top of the month when they had over $200 in overdraft protection charges!
I'd recommend NOT getting overdraft protection and instead making darn certain they'll balance their account (which we'll cover in a future article).
4. What About a Debit Card?
This is my ideas on kids having debit cards: it makes it a lot, much harder to balance the bank account while making it a lot simpler to overspend and run into trouble.
Are ATM machines handy? Sure, however I've never once used one in my total life. Part of teaching kids life skills is to teach them to be prepared. I keep an extra $10 in cash plus a couple of checks in my car. It would not trouble me if it acquired stolen.
In case you're decided that your kid gets a debit card, wait a minimum of six months after opening their account to allow them to study "the old fashioned way" and understand how the debit card affects their account after they truly start using it.
5. Should I Be On The Account Too?
I think it's a very good idea for you to be in your kid's first account so you'll be able to monitor their spending and make certain they don't cause a train wreck.
It is good to get statements with the intention to use that as a learning experience to go over them with your kid and educate them how one can properly dispose of them (in a shredder) in order that they lower their risk of identity theft.
Come up with a time frame or benchmarks until you pull your self off the account and let your kid take on the responsibility of an individual account.
Opening a bank account is a big step into a new world for kids and it needs to be a great experience. Walk your kids via the setup and look for the learning opportunities alongside the way.
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