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Kids and Banking: Why Teenagers Need a Bank Account

kids and banking

For more than a decade, you’ve been guiding just about every decision for your child from where they go to school to who they play with to how they spend their free time.

But as kids turn into teens, they demand more independence and, if you want them to move out of the house eventually, they need it. Luckily, the teenage years offer plenty of ways for parents to help their kids stretch their wings but keep a watchful eye on them. And setting up a bank account can be one way to teach them important skills before they leave the house.

According to an international study from the Organization for Economic Cooperation and Development, 53% of 15-year-olds have their own bank account in the United States. And just having a bank account bodes well for their knowledge of personal finance.

The study found that U.S. students who hold a bank account score 42 points higher in financial literacy than students who did not, according to the study. Students who work part-time jobs or take on babysitting or lawn care gigs are more likely to have an account than those who don’t, according to the study. In some cases, employers may require that workers maintain a bank account.

Depending on the child and family, some kids may sign up for their very first bank account long before they hit middle school or high school or start earning money on their own. If you’re planning on opening an account for your child or teen, here’s what you need to consider.

Kids and Banking: Considerations for Teenage Banking

Bank Account Age Restrictions

Laws vary by state, and some don’t allow minors to open accounts on their own. But, according to the Consumer Financial Protection Bureau, parents can open the account for a child and put both names on the account. That will provide parents more control about what goes in — and more importantly — what comes out of the account.

Savings vs. Checking

The goal right now is to teach your child lessons about personal finance — not make it easier for them to spend cash on big-ticket items or daily lattes. Opening a savings account instead of a checking account will provide an opportunity to focus more on smart money habits instead of how much they can spend. Kids also can watch their money grow in savings accounts as they earn interest.

When they start earning more money — through a part-time or summer job — or head off to college, it’s probably time to open a checking account.

Child Accounts

Local bank branches and online banks often have special accounts designed just for kids and their parents. They often come with low minimum deposit requirements to open an account and, in some cases, higher interest rate returns to encourage kids to save more. Banks also often provide parents and kids with age-appropriate literature about money and personal finance. The Simple Dollar lists some of the better bank accounts for kids.

Kids and Banking: Teaching Moments

As you open the account, deposit more money and watch it grow together, you’ll have an easy in to important discussions about money management. The Consumer Financial Protection Bureau’s Money as You Grow website offers plenty of expert tips to help kids develop strong skills and attitudes about money, including conversation starters for young kids to teens and young adults.

When kids know more about money, they can do better managing it. Opening a bank account with them when they’re young can pave the way for a life of good financial health.

Consumer Education Services, Inc. (CESI) is a non-profit committed to empowering and inspiring consumers nationwide to make wise financial decisions and live debt-free. Speak with a certified counselor for a free debt analysis today.


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