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Teens & Money: Checking & Savings Account

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Teens & Money: Checking & Savings Account


One of the first steps toward real freedom (and adulthood) is having a checking and savings account in your own name. These accounts allow you to save money, make purchases and pay bills efficiently. Both, however, require you to take an active management role, so you can achieve your goals and avoid errors.

Where to open the accounts

A good place to open your first account is a credit union. These not-for-profit financial institutions are owned by their members (account holders), and tend to have better loan rates and lower fees than banks. Some may even offer accounts specifically for teenagers. However, most financial institutions don’t provide individual accounts for those under 18, but they may offer custodial or joint accounts if a parent co-signs.

Start a savings account

Getting into the habit of setting money aside regularly is the foundation for a successful financial future. Be sure to sign up for automatic transfers from your checking account to your savings when you open the account. Once done, saving will be a breeze. All you have to do is choose the amount you want transferred and how often.

If you save a portion of every paycheck, it won’t be long before you accumulate an impressive sum. Financial experts recommend keeping three to six months’ worth of expenses tucked away in a savings account as a cushion, because there’s no tax consequence or penalty to take funds out. However, after you’ve built up enough to tide you over in the event of an emergency (job loss, unexpected car repairs, doctor visits, etc.) you can take the excess and begin to invest; your money will actually work for you instead of the other way around.

Managing a checking account

After you open your checking account, it’s your responsibility to handle and monitor it correctly. This means knowing how much is in your account at all times, reading your statements for accuracy, using more money than you have in it.

Don’t overdraw your checking account

Overdrawing your account is serious and can be expensive. If there aren’t enough funds to cover a transaction, it’ll either be paid by the financial institution as a courtesy or be rejected. If the transaction is paid, you’ll be charged a fee. How much? A lot. One bad $12 transaction could cost you $50 or more! In extreme cases, you may even be subject to court proceedings and be required to take special classes on money management.

To prevent overdrafts, many financial institutions offer overdraft protection. With it, if you conduct a transaction for more than what’s in your account, the overdraft protection will kick in and the transaction will be covered.

You can avoid accidentally overdrawing your account by always knowing how much you have in it. Keep track of the deposits you make, ATM withdrawals, debit card transactions and fees you’re charged by using mobile banking to check your balance before spending.

Keep your account balanced

Always read your account statements (or log in to online/mobile banking) and compare your balance with what the financial institution says you have. If there’s an item on your statement that’s not listed in your account history, first determine if it’s accurate. You may have forgotten something. If you believe the item is wrong, contact your financial institution to have it investigated immediately.

Using your ATM/debit card

When you open your checking account, you may be issued either an ATM (automated teller machine) card or a debit card. There are differences between the two:

atm or debit card
ATM Card

You can use an ATM card to withdraw cash, make deposits, transfer money between accounts, obtain your balance, etc. without having to go into a branch and speak with a teller.

Debit card

You can use a debit card at a store or restaurant as well as the ATM. It may look like a credit card, but it’s not; money is automatically deducted from your checking account when you use it. If it has the Visa® or MasterCard® logo on it, some financial institutions will allow you to exceed your balance as long as you have overdraft protection in place.

Whichever card type you have, be very careful with where you keep it and how you use it. Memorize your personal identification number (PIN), never share your card, and contact your financial institution immediately if it’s lost or stolen.

Managing all of your accounts well is important. If you do, you’ll always have the security a savings account brings, and you won’t waste money on checking account mistakes. Need more incentive to pay attention to your accounts? If you treat them right you’ll create a valuable ally with your financial institution. After all, you may be turning to them for a credit card or auto loan one day.