One of the first steps toward real freedom (and adulthood) is having your child establish his or her own checking and savings accounts. These accounts will allow your son or daughter to save money, make purchases, and pay bills efficiently. Both, however, require them to take an active management role, so that they can achieve their goals and avoid errors.
Where to Open the Accounts
Credit unions are a great place to open a first account for your child, as they tend to have better loan rates and lower fees than banks. Most financial institutions do not provide individual accounts for those under 18, but they likely offer custodial or joint accounts with a parent.*
Start a Savings Account
Have your child get into the habit of setting money aside regularly, as it is the foundation for a successful financial future. If they have a regular part-time job, or an allowance for doing chores around the house, be sure they sign up for automatic transfer of funds to put savings on autopilot: Have them choose the amount they want deducted regularly from their checking account and deposited into their savings account. Even if it is only a small amount, it’s teaching the valuable lesson of paying themselves first, and always saving a fraction of what they earn. Just be sure that they adjust the automatic transfer amount if incoming funds are also adjusted.
If your child works and saves a portion of every paycheck, it won’t be long before they accumulate an impressive sum. Financial experts recommend keeping three to six months’ worth of expenses tucked away in a savings account as a cushion, because there is no tax consequence or penalty to take funds out. However, after your son or daughter has built up enough to tide them over in the event of an emergency (unexpected car repairs, high credit card bill, etc.) they can take the excess and begin to invest; their money will actually work for them instead of the other way around.
Managing a Checking Account
After your child opens a checking account, make it their responsibility to handle and monitor it correctly. This means knowing how much is in the account at all times, reading their statements for accuracy, and never spending more money than they have in the account.
Teach Your Child Not to “Bounce” Checks
While writing checks has in many ways been replaced by debit and credit cards, ACH payments, and mobile banking apps, they are often still used for paying rent and school expenses, and are worth covering with your child. Bouncing checks is a serious and expensive business. If there aren’t enough funds to cover a check, it will be rejected when it comes in for payment. The check will be sent back to the person who deposited it and your child will be charged for “bouncing” it. The merchant the check was written to not only can charge a returned check fee, but your son or daughter may also be charged a hefty fee from their financial institution. In extreme cases, your child may even be subject to court proceedings and be required to take special classes on money management.
To prevent bounced checks, many financial institutions offer overdraft protection. With it, if a check is written for more than is in an account, the overdraft protection will kick in and the check will be covered. Typically linked to a savings account, there is a fee for this service (though it is much cheaper than bouncing a check).
Your child can avoid accidentally writing bad checks by always knowing how much they have in their account. Have them keep track of the deposits they make, checks they write, ATM withdrawals, debit transactions and fees they are charged in a mobile banking app such as Balance My Checkbook or Spending Tracker. Show them a good old-fashioned check register. Never write a check before making a deposit, counting on the “float” time. A check can clear the financial institution the same day it is written.
Teach Your Child to Balance Their Account
Always read the account statements (or log in to online banking) and compare the balance with what the financial institution says the account has. If there is an item on that statement that is not listed in your spending app or check register, first determine if it is accurate. You child may have forgotten to record something. If the item is correct, be sure they write it in their check register. If they believe the item is wrong, have your child contact their financial institution to have it investigated immediately.
Using an ATM/Debit Card
When your child opens a checking account, he or she may also be issued an ATM card or a debit card. Make sure he or she is very careful with where they keep it and how they use it. Have them memorize their personal identification number (PIN), never share their card, and contact their financial institution immediately if it is lost or stolen.
If your child manages their accounts well, he or she will always have the security that a savings account brings, and will never waste money on checking account mistakes. Plus, setting them up at an early age helps to instill great habits in the future. As their paycheck increases, so should their automatic transfer to their savings account!
How to Open a Quorum Membership for Your Child:
- 18 years and older: Click here to open a Quorum membership online.
- Ages 16-17: Click here to download the membership application for minors.
- Ages 15 and younger: Click here to download our custodial account application.
*Note: If a minor requests to open a checking or savings account and their age is 16 – 17, then a parent or legal guardian MUST be named as a joint account holder, and all associated services are available to the minor. (e.g., debit card, online banking, combined statement, etc.)
If a minor requests to open a savings account and their age is 15 and younger, a custodian MUST be named. If a minor requests to open a checking account and their age is 15 and younger, an account cannot be opened.