Teen Checking Delivers Freedom

by Darla Dernovsek

Keeping your spare change in a peanut butter jar may be OK when you're a kid, but when you hit those teenage years it's time to find a better place for your funds.

Teen checking accounts help you take a step toward financial independence by providing low-cost, flexible options for getting and managing a checking account. Many credit unions work with teens to offer checking accounts, which are sometimes called share draft accounts.

Credit unions are eager to strike a lasting relationship with teens, which makes credit unions enthusiastic about working with you and your parents. That message came from all three credit union representatives who shared their knowledge about teens and checking accounts for this article: Suzanne McClure, vice president of marketing at Burbank City Employees Federal Credit Union, Burbank, Calif.; Leah Olson, assistant vice president for business development at Kitsap Credit Union, Bremerton, Wash.; and Linda Hartney-Purdy, marketing and business development manager, Arizona Media Credit Union, Phoenix.

Are you ready?

Teen checking accounts typically are designed to serve teenagers age 13 to 18. Teens may have different reasons for opening their first account: increased earnings from a part-time job, the desire to have access to funds without carrying large amounts of cash, or even the need for an ATM (automated teller machine) or debit card for spending flexibility.

If you're ready for an account, start by finding out what your credit union offers for teens. At Kitsap Credit Union, for example, teens can open a checking account with a $5 deposit. There are no additional charges or service fees, and teens do not have to keep a minimum amount in the account. Kitsap also gives teens their first set of 50 checks at no cost--if they attend a free two-hour class about checking accounts.

Another checking account feature to look for is an ATM card or a combination ATM/debit card. An ATM card gives you access to cash from machines at multiple locations and allows you to make purchases at some stores and gas stations. A card that combines ATM and debit features will allow you to use the card to make purchases at a wider range of locations.

You'll want to find credit union branch locations and ATMs in order to easily make deposits and avoid ATM fees. Online banking is another feature offered by some teen checking programs, which means you can check the status of your account from your computer.

Keeping track

Once you know what an account will cost and what features are available, it's time to talk with your parents. If you're younger than age 18, many credit unions require that you have a parent listed on the account with you. But the account is still yours to spend and to manage. That means that you must be ready to keep track of your deposits and expenditures.

Remember, you'll suffer the consequences of carelessness if you take out more than you deposited. This is called an overdraft, and it usually carries a fee and also can have legal consequences.

To protect you from these problems, some credit unions will automatically shift money from your savings account to your checking account to cover overdrafts. Some credit unions also allow teens to enroll in overdraft protection programs. If you're eligible, overdraft protection, essentially a loan, allows you to exceed your balance by a reasonable amount--perhaps set at a maximum of $100--in exchange for paying a reasonable fee.

Teen clubs offered by some credit unions are designed to help you learn more about money management. These clubs may offer special benefits to members when they open their first checking account.

Classes can help

Some credit unions require teens to take a class in checking account management before they open an account. This class is a good way to learn about all the features and responsibilities of your account. It also can be a great way to persuade a reluctant parent that you're ready for your own checking account.

Teens often resist taking the required money management course at Burbank City Employees Federal Credit Union. Yet once teens complete the series of four classes about money management, a surprising number ask if they can repeat the course to make sure they understand all the details of managing their account.

"One of the things teens always think is that they want to be smarter than their parents," McClure says. "This is a way for them to do that."

Some teens seem to dread learning to balance their accounts, apparently because they've heard their parents complain about it. Balancing often is emphasized during money management classes, where teens learn the step-by-step process of matching their records to the balance listed on the credit union's monthly statement. McClure says teens typically learn that balancing a checking account is easy, as long as they're careful to record all their expenditures and then balance the account every month.

If teens have problems with their checking accounts, credit unions usually are willing to help them learn from their mistakes. Hartney-Purdy says credit union employees sometimes sit side-by-side with teen members to help them find errors in their accounts.

"We try to teach these teens not only money management skills, but also life skills," Hartney-Purdy says. "Just being aware of how to manage your money and do it successfully helps you learn to manage your life successfully."

A step ahead

Olson says parents of teens who open a checking account at Kitsap Credit Union often use the teen's account as a family money management tool. Instead of paying school fees for teens, for example, parents may periodically deposit money in the teen's account and give the responsibility for payment to the teen.

Parents who help teens open their first checking accounts often say they want to help their teens avoid money management mistakes the parents made when they were young.

"Parents have a lot of influence over the financial habits of their teens," Olson says. "Why should every generation learn by experience, when you can provide this information beforehand?"

June 9, 2003