Opening a Teen Savings Account

Before I started college my dad took me to the bank to open my very first checking account. He put a couple hundred dollars in my account and after that I was on my own. I was responsible for a third of my university bill and any extras I wanted. Dad made it clear I needed to get a job to pay for my share.

However, I didn’t last long in college. I missed my boyfriend who was 45 minutes away. (I know, I cringe just writing that. Teens can be so stupid in their decision making.) I dropped out after just a month of school. And in that month I racked up a hefty long distance bill (talking to my boyfriend) and spent much of the money in my checking account on dinners out with friends and snack foods at the grocery store.

I never did get a job while I was in school. I just couldn’t find the time between classes and my busy social life. I didn’t get a job until I moved back home and my dad gave me an ultimatum. He said, “If you want to live in my house you either go to college or you get a job.” I decided to get my very first job. I was eighteen-years-old.

Like most teenagers, I wanted my own car. I was tired of having to borrow my dad’s 1979 Chevette (this was in 1992 mind you). So with my dad as a co-signor I traded in that Chevette for my first car. An old Ford Tempo. I promised my dad I would make the payments on time every single month. I broke that promise. Several times.

Shockingly, even though I had a job, I was not very good with my money. I didn’t save any money and my checking account was usually drained days before my next payday. I started to ask for more hours at work. Obviously I wasn’t making enough money to live (at least that’s what my immature brain thought).

After a few months my relationship with my stepmother had really deteriorated. I wanted to move out, but couldn’t afford the deposit to get my own apartment. I was thinking of moving thousands of miles away to live with my mom. Instead my dad decided to help me out again. Together we found a cheap one bedroom apartment. My dad paid the deposit and first month’s rent.

Things were going well at first. But then I started calling in to work sick to go out partying with my friends and my new boyfriend. That meant I was late on my car payment that month. Then I was short on my rent. And once you’re behind it’s hard to catch up.

Then a miracle happened. I got a credit card in the mail. Now I could pay for my partying and groceries with the credit card and use my paycheck for my car payment and my rent.

I think you know where this is going. My debt got way out of control. By the time I found out I was pregnant with my first child, I had quite a bit of credit card debt and was struggling to pay my rent and car payment. My credit card was maxed out and the interest rate had skyrocketed due to late payments. My credit score was in the toilet. I finally had to suck it up and move home.

It took me many years to overcome my disastrous start with money. It’s so easy to spend money and bury yourself in a ton of debt, but then it takes years, YEARS, to correct that damage. Today I still have some credit card debt (new debt), but I can pay all my bills each month with some money left over and my credit score is back in the green. It was a really tough struggle to get to this point.

Since then I have felt strongly that my kids need to understand money; how to get money and how to keep it. I’ve given our kids an allowance and tried to stick firm that I would not buy them luxuries. That’s what their allowance is for. (This is actually easier said than done. It’s those darn teenager puppy dog eyes.)

Recently I decided the kids need their own account to manage. So earlier this week I took my teenagers to the bank. We opened joint savings accounts for both of them. That way I can transfer their allowance from my checking account to their savings account each week. And they will accrue interest on their money.

These savings accounts come with ATM cards and online account access. This will allow them to get a clear picture of their money and where it’s going; or at least how often and how much they are taking out. And with the ATM card they can access their own money any time they want. This is their first test. How will they manage their savings with their ATM cards? We’ll see how it goes.

Our personal banker also told the kids about special CDs just for kids. First he explained what a CD is because neither of my kids know (clearly we need to have some discussions about savings and investments and such.) They just need $100 for a CD and they can add more money in $100 increments. My fifteen-year-old is already envisioning saving up money for a car so this might be a good option for him.

My oldest will be sixteen this Spring and is already thinking about getting a job. I told him if the savings account goes well, we’ll discuss opening a checking account after he starts making some money. He can’t get a checking account on his own until he’s eighteen, but he can get one in his name as long as a parent is on the account as well.

The checking account will be the next test. The test I’m kind of worried about because with a checking account you can bounce checks. But he needs to understand how a checking account works and how the bank applies fees when checks are bounced or debit cards are used too often. He needs to know how to keep track of his spending, how to write a check, how to fill out a deposit slip and how to balance his checkbook. These are all skills we sometimes forget to teach our kids.

We need to send our kids off in to the real world with all the skills they need to survive. Parents often overlook the importance of teaching kids how to manage their money, but I consider it one of the most important skills a child needs to know. Bad credit can mean your child is driving around in an unsafe broken down car and living in a small apartment with five other guys because he can’t get a loan. A poor credit score can make it difficult to get a job. Large debts can take ten, twenty, thirty years to pay off, especially with interest rates in the teens and twenties.

I don’t want my kids to learn about money through the school of hard knocks. I want them to learn about the importance of paying bills on time before their electricity is shut off or their car is repossessed. And it’s my job as their parent to help teach them.