Posted on Jul 16, 2020
Many teens think about how they can earn money so they can spend it, but it’s important to learn how to manage it as well. The best place to start is with a bank account. Once you land that new job, you should establish a bank account---typically, with a parent or legal guardian as joint owner---to keep track of your new earnings and to keep your money safe. This one step will open the door for hands-on experience managing money and discussions with others on various aspects of financial management, which will help you prepare for the future.
Opening a Bank Account as a Teen
Banks offer accounts with different features, so it’s important to find out what is available for students and young adults, then compare them to make the best selection for your situation. Some considerations when deciding on an account include minimum account balance requirements, online and mobile banking features, ATM fees, and interest rates offered.
Share and Gain Knowledge
Once you establish a bank account, make sure you understand the information provided in bank statements, such as how money is credited to and debited from your account and the difference between an account’s current balance and available balance. Review your initial account statements with someone who knows the information well and take the opportunity to learn about things like direct deposit and automatic bill payments.
Different banks charge different fees for different items, making it very important to know all about the fees your particular bank charges in relation to your specific account. Some common fees include monthly maintenance fees, paper statement fees, inactivity fees, debit card replacement fees, and overdraft fees. Learn about your bank’s fees by reviewing its account agreement or fee schedule.
Talk About Savings…and Interest
You should also understand the importance of things like saving for emergencies and how compound interest works. Putting even a small amount of money from each pay into a savings account and leaving it untouched will allow the account balance to grow because when an interest payment is added to the balance, the balance increases, and when the next interest payment is calculated, it is based on the balance that includes the previous interest payment. Watching savings grow by putting money away on a regular basis and understanding compound interest can be exciting and very rewarding.
Where Does the Money Go?
Having a bank account is a great tool to help a new money-earner see the value of savings and also how to budget. Teens can work with an experienced adult to figure out how much money is coming in and how to split that money up to buy day-to-day items, pay commitments, and still set some aside for savings.
Use Mobile Banking Wisely
Mobile banking allows you to perform many banking activities on your smartphone or tablet. There are also a number of apps you can use for budgeting, tracking spending, and paying others. While technology has made banking much more convenient, you must be proactive about protecting your account information and personal information---like your Social Security number---so that it is not stolen. Some measures you can take include creating strong passwords for your accounts and devices, avoiding logging into your accounts through a public Wi-Fi network, and never saving usernames and passwords in your browser.
Money management is an important skill for young people to learn before they leave home, and a bank account is a great tool for teaching about handling money. By opening a bank account, you open the door to important discussions and lessons about savings, budgeting, and proactive financial management.