Financial Skills – Opening a Bank Account

I was surprised when I asked parents to tell me the life skills they wish their kids knew, and there was a resounding request for kids to learn how to open a bank account.

Similarly, there was a huge call out for:

How to budget & balance accounts
How to write checks and pay bills
And how to start saving for retirement

It seems some of the things we take for granted are, as a result, missing from what we teach kids.

This article is the first article in the four-part series and will discuss the best and simplest way to get started with opening a bank account.

It seems easy, but there are several questions many people never think of that we’ll address in this article:

Which bank?
Checking or savings account?
Are there fees or minimum balances?
Should I get a Debit Card too?
Should I have my name on the account with my kid?

1. Choosing a Bank

When you choose a bank, there are a few criteria you’ll want to look at:

Location
Number of branches
Ease of access

The location should be convenient to your home, but also have enough branches so that – in the case of an emergency – you can get to your bank.

I opened an account with Elevations Credit Union when I was attending CU Boulder. It was convenient and credit unions are really great to bank with. However, after I graduated and moved, there were no branches around me, which made things very inconvenient. I ended up opening an account with US Bank since they are in about every King Soopers, where I do my grocery shopping.

This is especially important with kids because you don’t want them to have to drive too far just to bank.

Similarly, ease of access into the branch is important. I remember having a Norwest (now Wells Fargo) account, and getting in and out of the bank’s parking lot was terrible. I had several near-miss car accidents and dreaded even going to the bank.

2. Checking or Savings Account

As you’ll learn in the future article about saving and budgeting, there should be an account that is used for saving and investing.

That means it’s important to have BOTH a checking and savings account.

The reason a checking account is important, is so that kids can learn how to write checks, and have a designated spending account aside from a designated savings account.

Checking accounts are important for paying bills (be it online or via mail) and will give kids the opportunity to learn how to write checks. Even if check writing isn’t as prevalent as it once was, it’s still important.

I was shopping one day and realized I forgot my wallet, which had my credit cards and cash. I started to panic because I needed some food. Fortunately, I keep a couple of checks in the car and was able to save myself by writing a check… they still come in handy!

3. Fees & Minimum Balances

Some banks have fees to have an account and others don’t. Obviously get the one that doesn’t since your kid shouldn’t have a huge account. Likewise make sure there isn’t a minimum balance or a very small ($10 or less) minimum balance.

Just as important is how overdrafts are handled!

When I was in college, it never failed: my peers (who hadn’t learned how to balance an account) would routinely trigger their overdraft protection and the hefty fees that went along with it.

They would look at their balance online and it would show $10. Then they’d check it again a few days later and it was at $30.

It was the magical growing bank account; and they never wondered where the extra money came from. Until the end of the month when they had over $200 in overdraft protection fees!

I would suggest NOT getting overdraft protection and instead making darn sure they can balance their account (which we’ll cover in a future article).

4. What About a Debit Card?

Here’s my thoughts on kids having debit cards: it makes it much, much harder to balance the bank account while making it much easier to overspend and run into trouble.

Are ATM machines convenient? Yes, but I have never once used one in my entire life. Part of teaching kids life skills is to teach them to be prepared. I keep an extra $10 in cash plus a few checks in my car. It wouldn’t bother me if it got stolen.

If you’re determined that your kid gets a debit card, wait at least six months after opening their account so they can learn “the old fashioned way” and understand how the debit card affects their account when they actually start using it.

5. Should I Be On The Account Too?

I think it’s a very good idea for you to be on your kid’s first account so you can monitor their spending and make sure they don’t cause a train wreck.

It’s good to get statements so that you can use that as a learning experience to go over them with your kid and teach them how to properly dispose of them (in a shredder) so that they decrease their risk of identity theft.

Come up with a time frame or benchmarks until you pull yourself off the account and let your kid take on the responsibility of an individual account.

Opening a bank account is a huge step into a new world for kids and it should be a great experience. Walk your kids through the setup and look for the learning opportunities along the way.

Financial Skills – Writing Checks & Paying Bills

I was surprised when I asked parents to tell me the life skills they wish their kids knew, and there was a resounding request for a few topics:

How to open a bank account
How to budget & balance accounts
How to write checks and pay bills
And how to start saving for retirement

It seems some of the things we take for granted are, as a result, missing from what we teach kids.

In the last article, we focused on budgeting & balancing accounts. We even looked at games and contests you could set up for your kids. This article is the third article in the four-part series and will look at how to teach kids to write checks and pay bills.

Paying Bills

I was a bit surprised when several parents recently reported they had teens that were going to pay a bill by sending cash. I guess the obvious isn’t so obvious.

Paying bills is often done online, so it’s important to teach kids how to protect their identity online and store their login information where it can’t be stolen or accessed.

However, there are still quite a few companies that don’t offer online payments, and the only way to pay their bills is via check in the mail.

All kids should know why you NEVER send cash, and how to write a check specifically for paying a bill. For example: putting your account number and any other required details in the memo.

This brings us to the next topic: writing checks.

Writing Checks

When I was 12 years old, I went to outdoor ed. Oddly enough, part of the experience was that we could only write checks to buy goodies there, and our parents put a certain amount in our accounts so that we would also have to budget and balance our register.

Most of the kids were nervous! They weren’t sure how to fill out a check, and it was a great learning experience. I remember being nervous because we were required to fill out the amount in cursive, and I had trouble fitting it into the space.

These days, many kids never even think about writing checks because there are so many other means of transacting much more common; however, I’ve still found myself in need of checks for bills, paying contractors, and even helping me out of a pinch when I’ve forgotten my wallet.

Additionally, in my previous articles, I’ve expressed the dangers of using and relying on a debit card.

So how do you get your kids to learn how to write checks, and why would they care?

Getting Kids Involved

The best and most interactive way to teach kids to work a checkbook is to come up with a reason for them to write checks.

Here’s how it’s done:

Give your kids an old checkbook, play checkbook, or make your own (complete with a register). Then tell them in order to get certain things around the house, they’ll need to write checks. For example, to use their electronic device, there’s a rental fee that requires them to write you a check.

In addition, you can also give them a budget for the month to help them balance and budget their spending. You should balance a separate register so you can compare at the end of the month for accuracy.

Kids absolutely love this game.

Here are a few things you can charge for:

Using electronic devices
Watching TV (by the hour)
Special snacks or treats
Bicycle rental fee
Getting out of a chore (limited usage)

At the end of the month, if your kids keep a positive balance they get a prize. If you have more than one kid, whoever is the most accurate in balancing their register can also get a prize.

Monetary Policy

Monetary policy is a set of measures taken by Central Bank of the government to stabilize the economy (strengthening the national currency, accelerating economic growth, lowering prices, and so on). It is part of the macroeconomic policy, carried out by using various methods and tools, depending on objectives.

In developed economies monetary policy has to serve the function of stabilization and maintaining proper equilibrium in the economic system. But in case of underdeveloped countries, the monetary policy has to be more dynamic so as to meet the requirements of an expanding economy by creating good conditions for economic growth. Monetary policy can be strategic, intermediate and tactical. Under strategic or primary goals the following tasks are very important.
– Increase of employment among the population;
– Normalization of the price level;
– Containment of inflationary processes;
– Acceleration of economic growth;
– Increase in production volumes;
– Alignment (balancing) of the balance of payments of the state.

By contrast intermediate goals are realized by changing the interest rates and the amount of money in circulation. In this way, it is possible to adjust the current demand for the goods and to reduce (increase) the supply of money. The bottom line is to influence the level of price policy, attract investment, increase employment and increase production. At the same time, it is possible to maintain or revive the conjuncture in the money (commodity) market;

Tactical goals are of short-term nature. Their task is to accelerate the achievement of more important – intermediate and strategic objectives:
– Monitoring the supply of money;
– Control of the interest rate level;
– Control of the exchange rate.

Types of Monetary Policy
Each country chooses its own kind of monetary policy. It can vary, depending on external conditions, the state of the economy, the development of production, employment and other factors. The following types are distinguished:

1. Soft monetary policy (its second name is “cheap money policy”) is aimed at stimulating various sectors of the economy by regulating interest rates and increasing the amount of money. At the same time, the Central Bank performs the following operations: – Makes transactions on the purchase of government securities. All operations are conducted in the open market, and the proceeds are transferred to the banks’ reserves and to the population’s accounts. Such actions allow increasing the amount of money supply and improving the financial capacity of banks. As a result, the interbank loan is in great demand;
– Minimizes the rate of bank reservations, which significantly expands the lending opportunities for various sectors of the economy;
– Reduces the interest rate. As a consequence, commercial banks gain access to more profitable loans terms. At the same time, the volume of loans extended to the population on more favorable terms and the attraction of additional funds in the form of deposits.

2. Rigid monetary policy (its second name is “expensive money policy”) is aimed at imposing various restrictions, restraining the growth of money in circulation with the main goal – restraining inflationary processes. With a strict monetary policy, the Central Bank performs the following actions:
– Increases the limit of bank reservations. In this way, a reduction in the growth of the money supply is achieved;
– Raises the interest rate. For this reason, commercial structures are forced to stop the flow of borrowing from the Central Bank and to limit the issuance of loans to the public. The result is a suppression of the growth of money supply;
– Sells government securities. At the same time, transactions are made on the open market due to current accounts of the population and reserves of commercial credit and financial organizations. The result is the same as in the previous case – a decrease in the volume of the money supply.