Parents who show their kids how to handle money empower them to develop financial responsibility. Wise parents expand those conversations as their children mature. When parents teach kids about checking accounts, they learn a powerful lesson in money management that can help them develop smart spending habits and good credit.
Explain to your child that your bank or credit union keeps your money safe. By keeping it there, you don’t have to carry large amounts of cash, it can’t be lost or stolen, and you can write checks or use a debit card to make a purchase.
Tell your child that the presence of cheques or an ATM card doesn’t necessarily mean money is available to spend.
Show your child your cheque register. Explain how money deposited into the account is added in the register, while money spent using checks or your debit card is subtracted.
Ask your financial institution for a pack of starter cheques and a blank register (or print samples from the internet). Show your child how to correctly fill out a check and have him practise recording simple transactions into the register.
Stress the importance of writing an entry every time money is moved in or out, and of keeping the total updated. Explain to him that this is how you keep track of how much money you have.
Take your teen to open his first bank account. Fund the account with your child’s money from allowances, birthdays or other savings and gifts.
Create ground rules regarding acceptable use of funds such as maintaining a minimum balance, staying under the spending limit and buying only planned purchases. If self-control is a problem, sign up for overdraft protection and consider an account that requires dual signatures.
Use a starter check kit from your financial institution (or samples printed off the internet) to explain how to fill out the paperwork.
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