Let’s discuss the best and simplest way to get started with opening a bank account.
It seems easy, but there are several questions many people never think of that we’ll address in this article:
- Which bank?
- Checking or savings account?
- Are there fees or minimum balances?
- Should I get a Debit Card too?
- Should I have my name on the account with my kid?
1. Choosing a Bank
When you choose a bank, there are a few criteria you’ll want to look at:
- Number of branches
- Ease of access
The location should be convenient to your home, but also have enough branches so that – in the case of an emergency – you can get to your bank.This is especially important with kids because you don’t want them to have to drive too far just to bank.
Similarly, ease of access into the branch is important.
2. Checking or Savings Account
As you’ll learn in the future article about saving and budgeting, there should be an account that is used for saving and investing.
That means it’s important to have BOTH a checking and savings account.
The reason a checking account is important, is so that kids can learn how to write checks, and have a designated spending account aside from a designated savings account.
Checking accounts are important for paying bills (be it online or via mail) and will give kids the opportunity to learn how to write checks. Even if check writing isn’t as prevalent as it once was, it’s still important.
3. Fees & Minimum Balances
Some banks have fees to have an account and others don’t. Obviously get the one that doesn’t since your kid shouldn’t have a huge account. Likewise make sure there isn’t a minimum balance or a very small ($10 or less) minimum balance.
Just as important is how overdrafts are handled!
I would suggest NOT getting overdraft protection and instead making darn sure they can balance their account (which we’ll cover in a future article).
4. What About a Debit Card?
Here’s my thoughts on kids having debit cards: it makes it much, much harder to balance the bank account while making it much easier to overspend and run into trouble.
Are ATM machines convenient? Yes, but I have never once used one in my entire life. Part of teaching kids life skills is to teach them to be prepared.
If you’re determined that your kid gets a debit card, wait at least six months after opening their account so they can learn “the old fashioned way” and understand how the debit card affects their account when they actually start using it.
5. Should I Be On The Account Too?
I think it’s a very good idea for you to be on your kid’s first account so you can monitor their spending and make sure they don’t cause a train wreck.
It’s good to get statements so that you can use that as a learning experience to go over them with your kid and teach them how to properly dispose of them (in a shredder) so that they decrease their risk of identity theft.
Come up with a time frame or benchmarks until you pull yourself off the account and let your kid take on the responsibility of an individual account.
Opening a bank account is a huge step into a new world for kids and it should be a great experience. Walk your kids through the setup and look for the learning opportunities along the way.
Arm your kids with financial skills and hacks.