Should Your Teen Have Their Own Bank Account?

Should You Get a Bank Account for Your Teen?

Your teen may want to participate in afterschool events or spend time with their other teenage friends, and you might not always be with them. If they need money for transportation, food, or other activities, a bank account is a quick, convenient way to give them funds without driving to deliver cash by hand. Opening a checking account for your teen can also quench their thirst for more independence. Instead of begging for cash from you, they’ll be challenged to keep tabs on their own earning, spending, and saving.

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What Should You Look for in a Bank Account for Teens?

Finding the best checking account for teens can be a big task because you could be on the hook for any frivolous spending your teen has. When researching teen bank account options at different financial institutions, there are factors you should inquire about.

• A teen checking account that has a connected savings account. Empowering your teen with their own bank account isn’t just about them being able to spend freely, but you may also want them to learn how to save their money too.
• If parents can be joint account holders on the teen’s bank account. Most bank accounts for teens will require a parent, or legal guardian, to be responsible for the account’s activity as well. If your teen overspends, you may be responsible for any debt owed to the financial institution.
• Does the teen’s checking or savings account earn interest? One of the best parts about some teen bank accounts is that they can accumulate interest based on daily balances. Research different interest rates to help your teen earn money while they save.
• What overdraft protection policies do the teen bank accounts have? If you fear that your teen might not be financially responsible yet, you may not want them to have the option of overdrawing their account. Before you sign your teen up for a bank account, make sure the bank doesn’t have overdraft protection for their account unless you or your teen can cover any of the associated fees.

What Are the Pros of Teen Bank Accounts?

Outside of providing your teen a taste of freedom and independence, giving them their own bank account has other benefits too. With a teen checking account, they’ll have their own debit card. With their debit card, they can learn how to safely make card purchases and use the ATM. They can also withdraw their own cash as necessary and learn how to manage cash purchases.

If your teen has a smartphone, they can track their spending and savings in the financial institution’s mobile app and use the transactions list to create their own budget. When your teen gets their first job, they’ll be able to set up direct deposit to their bank account instead of having to cash a paper check. These common banking practices, that some people don’t see until they’re adults, can set your teen up for good financial habits when they’re in college and throughout their adulthood.

What Are the Cons of Bank Accounts for Teens?

When your teen is first introduced to having easy access to money, they might misuse their bank account. If they spend more than they have in their checking account, they will need to ask you to transfer them money, or they’ll have to move money from their savings account. If the teen checking account has overdraft protection, your teen’s overspending can carry a negative balance and accumulate unpaid fees. If their bank account closes in a negative status, they may have a hard time opening another account in the future.

With great power comes great responsibility, so it’s important to teach your teens good financial habits while they manage their own bank accounts. While a checking account for teens can prepare them for how they bank as adults, it can also be a source for overspending. If you open a checking account for your teenager, sit with them and provide them budgeting and savings tips so that they start off on solid financial ground.