Opening a bank account for your young adult
For parents teaching their kids about money, the teen years are the last few years you’ll have to make an impression before your child becomes responsible for his or her finances. Like many parents, you’ve likely been giving your teens spending money or—even better—a regular allowance. A key step in your child’s financial literacy is establishing a checking or savings account. But parents have to decide when is the right time to take this step.
Sit down with your teenager and have a discussion about the following topics:
- Budgeting. Does your teen know what it means to stay within a budget? To help your teen learn about money management, use your own monthly budget as a model, and share our budget spreadsheet with your child.
- Saving. One financial lesson we all need to learn is to avoid spending money on things we don't really need in order to save for the things that are important to us. Talk to your teenager about setting savings goals.
- Earning. Does your teenager earn money for projects around the house or work a part-time job? If so, teach your child how to deposit checks and save a percentage of their pay.
Bank accounts for teens
If you feel your teen is ready, contact your bank to determine the minimum age to open a bank account. As the parent, you may need to open the account for your child; visit your local bank together to find out. For example, at Bank of America, parents can sign an agreement for their teens aged 16 to 18 to open a checking account.
Different kinds of banking accounts meet different banking needs. For example, your teen may want a low-fee debit card, or a savings account for college. Talk to your teen about how to choose a bank account.
Money Management Tip #16
Kids learn by example. Be a good role model in how you save and spend money.
Custodial savings accounts
Also known as UTMA accounts, Uniform Transfers to Minors Act. These allow people to gift money to your child. The money accumulates interest, but your child does not have access to the funds until he or she reaches 18 or 21, depending on state law. Good for younger kids.
Regular savings accounts
A regular savings account can be a great way to teach a teenager about the value of interest, as well as financial concepts like deposits and withdrawals. The minimum amount needed to open an account can be low, and you can let your teen deposit or remove cash from the account through a debit card. Find out whether you can set up automatic transfers to the account, and what the transaction fees are.
A checking account gives your teenager easier access to funds through check writing or use of a debit or ATM card. If your teen is mature, having a checking account can help him or her learn budgeting skills. Teach your teen about how they can limit their transaction fees and help avoid overdraft fees by using their account responsibly. Make sure your teen knows how to guard against fraud and protect their bank cards and PIN numbers. Also, ask your teen's bank about security features and policies for their accounts and bank cards.
The details of how these products work will depend on the bank or financial institution. A careful review can help you decide if the product carries the balance of accessibility and security that's appropriate for your teen’s level of financial responsibility.
What's next? Preparing teenagers for their first job
Some accounts and services, and the fees that apply to them, vary from state to state. Please review the information for your state in the Personal Schedule of Fees (at www.bankofamerica.com/feesataglance or at your local Banking Center) and in the Online Banking Service Agreement at www.bankofamerica.com/serviceagreement.