Why Teens Should Open a Checking Account

August 9, 2019 | Mission Fed

For parents, helping your teens open their first checking account will jump start them to other milestones in their life, like: landing their first job and being granted their driver’s license. It is another milestone along the path to adulthood. As a teen, opening a checking account does not sound like the most eventful moment of your life. However, putting your money in an account that’s yours and yours alone, will bring a new sense of independence.

Every teen should experience opening a checking account. Opening an account as early as the age of 13, or when they get their first job, would help them start becoming a “responsible teenager.” Regardless of when it happens, understanding the value of a checking account from a young age is key to developing strong financial habits.

Difference Between Checking and Savings Account

The first step on the journey to financial independence is understanding the difference between a checking and savings account. Most teens have used their parents’ debit or credit card to make a purchase. The basic function is simple, and the underlying accounts are equally straightforward.

  • Checking account – Your checking account holds money that is “liquid,” or ready to be spent. When you use a debit card to buy something at the store, it is the same as using cash. Debit cards allow you to access your checking account at an ATM and pull out money.
  • Savings account – If you want to put money away that you will not accidentally spend, you can hold it in a savings account. Building up this account is what allows you to save for expensive purchases like a new guitar or a new home.

A Lesson in Responsible Financial Habits

When you have cash in your possession, it is easy to see where you spend it and how much you have left. This is different from having your money tucked away in a checking account where you are not constantly reminded of your balance every time you pay. To develop responsible financial habits, try focusing on one practice at a time.

  • Deposit income immediately
  • Settle any debts
  • Track expenses and learn how to budget
  • Avoid an overdraft charge and other fees

Depositing Any Income Immediately

The first important habit to develop is putting any money you receive into your checking account. Once you have a savings account set up, this will give you a chance to put a small percentage, typically between 10% to 20%, into a savings account.

Settle Your Debts

Before you run off and purchase those new shoes, be sure to settle any outstanding debts you may have. For a checking account, the most common form of debt is a negative balance.

Later down the road, when you set up a line of credit, you will want to develop the habit of paying this off first. Credit card debt can rack up quickly due to high 17% to 20% interest rates.

Tracking Expenses and Learning How to Budget

While you are depositing money and settling debts, be sure to look at your monthly expenses and payments. You should search for a few different patterns:

  • Are there any unauthorized purchases?
  • How much are you spending frivolously?
  • Are you on track to meet your financial goals?
  • What is your budget to spend for the next month?

Understanding Overdraft Charges and Other Fees

Making mistakes as a teenager when you first open an account can help clue you into the wonderful world of hidden fees. Credit cards, loan fees, interest rates — these are where banks make their money. To give you some perspective, in overdraft fees alone, the three largest banks make more than $1 billion each quarter.

To avoid joining this inclusive group of service fee payers, take a look through some of the most common service charges people incur:

  • Minimum balance – Some checking accounts require you to have a certain amount in your account. Otherwise, you’re charged a service fee each month.
  • Paper statement fee – If you haven’t switched over to e-statements, you might be paying a cost for each monthly statement you receive.
  • Inactivity fee – Be wary of inactivity fees by always keeping up to date on your finances and checking in with your account.

When looking for the best student checking accounts, find those without hidden fees and high minimum balances.

Next Up: Starting a Credit Line

Opening a checking account will prepare you for the next financial step: starting a credit line. Using a credit card and paying off the debt immediately will help build a strong credit score and will avoid costly credit card interest rates.

The average amount of debt for those under 35 years old is about $67,400—and it is not entirely from student loans. Surveys found that debt for this age group is split evenly between student loans and credit card debt.

By keeping on top of your finances and paying off credit card debt immediately, you can avoid the costly cycle of high-interest rates and unpayable monthlies.

Checking Accounts for Teens

The best checking account for teens is going to be the one with minimal fees and a low minimum deposit. Some credit unions and banks even offer a sign-up bonus for students to provide some benefits. Setting up one of these accounts early in life will prove worthwhile for developing financial independence and healthy spending habits.

The content provided consists of opinions and ideas and should be used for informational purposes only. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article does not constitute endorsement, control or warranty by Mission Federal Credit Union.


SNL. Big 3 banks rake in over $1B in overdraft fees during Q1.

Debt.org. Demographics of Debt.

Mission Fed

Mission Fed

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