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How to Teach Teens About Savings and Checking Accounts

by Tiffany Raiford, studioD

Financial know-how isn’t a subject on which many schools focus, which can lead to your teenager heading off to college and finding herself in debt, thanks to the endless number of credit card offers she receives. Not knowing how to balance her checkbook, keep track of the funds in her checking account or make the most out her savings account can hinder her financial success. It is crucial for your teen to learn why having a savings and checking account is important.

Savings

Step 1

Discuss the importance of saving and how savings accounts are useful for that, advises the Hands on Banking website. For example, your teen needs to know that a savings account is an account that typically does not have a debit card or checks tied to it, which makes spending the money in it more difficult. Furthermore, teens need to know that when it comes to opening a savings account, they should shop around for the best interest rates. As their money sits in the account, it accumulates interest based on the percentage offered when the account was opened, and the more your teen saves, the more she will accumulate in interest.

Step 2

Talk about the different types of savings accounts, advises the Hands on Banking site. There are savings accounts, certificates of deposit and money market accounts. Regular savings accounts typically limit the number of withdrawals your teen can make each month and accumulate interest on a monthly basis. Depending on the bank your teen uses, there could be a fee for maintaining a savings account. CDs are accounts that allow your teen to make deposits, but the money must stay in the account for a certain amount of time, such as a year or six months, depending on what your teen chooses. Banks charge penalties for making a withdrawal from a CD before the term is complete. With a money market account, your teen’s interest rate may change, but the rate is usually higher than other savings accounts. Money market accounts often have more stringent limits on the number of withdrawals allowed per period and higher minimum balances than traditional savings accounts, in return for the higher interest rate benefit.

Step 3

Help your teen learn to fill out deposit slips for his savings account. Use one of your deposit slips as an example and show him where to write the amount, the date and his personal information, such as his name and account number, if his deposit slips do not already contain that information. Follow that up with teaching him to go to the bank and make his deposit with a teller.

Checking

Step 1

Research different banks and checking accounts with your teen, advises the Bank of America website. Some banks offer teen-specific checking accounts and tools that allow your teen to learn how to bank from the start. Additionally, this is an ideal opportunity to teach your teen the importance of comparing terms, such as monthly fees, ATM fees and even convenient banking locations.

Step 2

Open a checking account for your teen with a debit card and checks. Teach her to write a check. She needs to understand how to fill it out, including the date, the dollar amount, the written dollar amount and her signature. However, she must also understand that checks are not funds. A check is a promise that those funds are available in her bank account and that the person to whom she is writing the check can remove those funds. It is imperative that she understands she cannot write a check if she does not have the funds to cover the check in her account, or she could incur fees and penalties.

Step 3

Sit down and read the fine print with your teen, advises the Bankrate website. He needs to know what will happen if he does not use his account responsibly. For example, the fine print will dictate the penalties he could face if he overdraws his account. It will also provide him with the cutoff for deposits so that he doesn’t think that just because he put money in the bank that it’s available for him to spend. For example, some banks do not show deposits until the following business day if the deposit is made after a certain time of day.

Step 4

Teach her to balance her checkbook and to understand that her debit card is not limitless. Teach her to write down in a bank book the checks she writes, the check number and the date, as well as to whom she wrote the check, and deduct that amount from her balance. Teach her to deduct her debit card purchases the same way and even to record her deposits. Additionally, she should know how to utilize online banking, how to check her balance, look at her transactions and see what has cleared her account and what has not. Ensure that she knows that her balance might not always match the balance the bank shows online, depending on whether she has outstanding checks or debits that have not yet cleared.

About the Author

Tiffany Raiford has several years of experience writing freelance. Her writing focuses primarily on articles relating to parenting, pregnancy and travel. Raiford is a graduate of Saint Petersburg College in Florida.

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