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Your child’s first checking account

Posted May 22, 2013 in Advice Column, Pleasant Hill

It may seem like just yesterday that you were dropping her off for her first day at school. And now, you’re shopping around for her first checking account. How time flies.

But don’t take this moment lightly. Adolescence is a critical time for teaching children about money. They are beginning to earn some money of their own and starting to make their own choices about clothing, accessories, bicycles and expensive coffee. They are starting to gain awareness of the importance for saving for a longer-term goal, such as a car or college.

But they also need to be able to access money without you holding their hand at all times. For safety reasons, you don’t want them carrying around a lot of cash. The solution: Their own checking account, with a debit card and ATM access.

Minors, of course, cannot enter into legal contracts of their own. A parent or guardian must act as cosigner on any accounts they open at a credit union or other financial institution. That means you retain overall control. But you are also on the hook should your child go on a wild spending spree, and that’s a good motive for helping them learn to spend wisely and manage their account.

Banks and credit unions allow parents to maintain full control and access to accounts that are set up for their minors. Depending upon your financial institution’s policies, you can choose from these common parental controls:
•    Separate account logins, so you can see all the transactions your child makes.
•    Limits on ATM withdrawals.
•    Optional overdraft protection.
•    “Sweep” savings accounts — a system that looks at each transaction on the debit card purchase, rounds up to the nearest dollar and transfers it to a savings account that grows over time.
•    Limits on debit card transactions.

As your child matures and displays an ability to responsibly spend and manage his or her account, you can relax some of these restrictions.

Pay careful attention to the terms and conditions on the account. A $12 per month maintenance fee may not be a big deal to an adult with a full-time career. But it’s a big chunk of a child’s total monthly cash flow. Look for low or no monthly fees. You may want to check out your local credit union.

Information provided by Brenda Reichert, branch manager, 1225 Copper Creek Drive, Suite M, Pleasant Hill, 515-278-5333.

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