Sooner or later, kids outgrow the piggy bank. Teenagers especially need a place to deposit paychecks from their first part-time job, or maybe you want them to learn about financial responsibility before heading off into the world. A teen checking account can be a perfect solution.
Here's how you can help your teen choose an age-appropriate checking account.
1. Understand your responsibilities as the parent
If your child is younger than 18, opening a teen checking account means you are opening a joint account with your child. You are a co-owner on the account, meaning that you share the financial burden of any overdrafts or fees incurred. Make sure your teen knows they're being trusted with this responsibility.
2. Ask the right questions about potential teen checking accounts
Before you select a checking account with your teen, research these frequently asked questions on the bank’s website and terms of service to make sure it’s a good fit.
Q: Does the account come with spending limits?
A: Some banks and credit unions assign daily spending limits to teen checking accounts, while others allow parents to set such restrictions. These include limits on the amount of money that can be withdrawn at an ATM and the amount of money spent using a debit card. Pick an account with daily spending limits that you find reasonable.
Q: Can a parent set other restrictions?
A: You might be able to specify whether your child can transfer money, make withdrawals or make a deposit. Depending on how much freedom you want to give your teen, you may not need these features.
Q: Do you have to have your own account with the bank?
A: It depends. Some banks and credit unions require a parent to have an account with their institution in order to open a teen checking account, but this isn’t the case at all places. Look into the fees and consequences involved when you close your account or your teen’s account.
Q: What happens when a teen ages out of the account?
A: Usually when a teen turns 18, the account is either converted or transferred to a standard checking account with new fees and requirements. As an adult, they will have to decide whether to keep the new account or switch to another bank.
3. Look for teen-friendly tech features
Bank accounts offer all kinds of online money transfer and banking services. Make sure your teen's account has the features that they might need, which could include the following:
Mobile AND text banking
A good banking app will offer push notifications about account balances, as well as the ability to deposit checks on the go and make person-to-person money transfers with bank-integrated services like Zelle. Some institutions also have texting features that make it easy to check account balances and recent activity, and they can send alerts that can help avoid overdraft fees.
» See our list of best banks for mobile banking
P2P AND mobile wallets
When kids exchange money with one another, odds are it's not cash and coin. Instead, they're using peer-to-peer payment apps, such as Venmo or Cash App. Most checking accounts and debit cards can be linked to these apps, but because this is a joint account, you and your teen should understand the security features and any fees involved.
Your teenager also can link a debit card to buy items in stores that accept technologies such as Apple Pay and Google Pay. If your teen often forgets everything but their phone, a mobile wallet can be a lifesaver. The feature also has a security layer (called tokenization) that means the actual card number isn't involved in the transaction; instead, the app creates a one-time payment code.
Some credit unions and community banks offer educational resources for teens online or in person. Depending on how educational you want the experience to be, some workshops or webinars can be efficient supplements to your own banking lessons.
4. Try to avoid account fees
Free is best
This account is a teaching tool; it doesn't need to be fancy. Don't sign up for one that charges a monthly maintenance fee or requires a minimum balance. If check-writing is something you'd like your child to learn, look for an account that offers free checks.
Choose a good ATM network
After this experience, your teen will no longer think of you as an ATM. Instead, teach them the difference between in-network ATMs (ones where you won't be charged fees to withdraw money) and out-of-network ATMs (ones where you probably will be charged, by your bank and/or the ATM owner, between $2 and $5 each time).
Avoid fees altogether by getting an account at a bank or credit union with a large free ATM network, and let your teen know, too, that grocery stores and many other retailers will let you get cash during a transaction at no extra charge.
Avoid overdraft fees
Save yourself headaches — and money — and get your teen into the habit of checking account balances. A teen checking account with what's called overdraft protection means either the bank will cover an expense that dips the account into the red — and charge upward of $34 for it — or that the checking account will be linked to a savings account or a credit card so that money can be drawn from there to cover the expense.
Opt out of such protection — meaning if your teen tries to buy something but doesn't have enough money, the debit card transaction will be declined — or pick an account with the lowest overdraft fees.
Some things have to be learned firsthand. Even after lessons and warnings, your child may not fully understand the costs of an account until they have to pay fees out of their own pocket. Choosing the right teen checking account can minimize these expenses, making them a small price to pay for some valuable financial education.