A checking account can empower your teen to develop good financial habits and a healthy independent streak.
My parents had me open my first checking account when I was around 13 or 14. I didn’t realize how valuable this simple step of “adulthood” was to the rest of my life until I started meeting with people about their money.
Based on my own experience, here are six reasons why I recommend having your child open a checking account in their early teen years:
Responsibility
I’m 36, so it was about 23 years ago when I opened my first checking account — yet it was one of those experiences I can still vividly remember.
Most specifically, I can still remember the banker leaning over the table at me, her eyes protruding over her glasses, and giving me a lecture about not spending more money than was in my account. Body language tells everything, and I could tell she thought this experiment was going to be a disaster.
I made it my mission to prove her wrong. I never once had an overdraft and I proved to the banker that I could be responsible with my money even as a young teen. Learning that responsibility with a checking account set me on an early path to financial freedom.
Good Habits
Walking out of the bank that day I also knew, in order to prove the banker wrong, I needed to form good habits and be organized with my money. I therefore taught myself how to keep a neat and organized check register and how to reconcile my register with my bank statement on a monthly basis.
Since I started those good financial habits as a young teen, they became ingrained as second nature. Most importantly, I immediately learned I could never spend more than I had saved. Because I formed this habit at an early age, it became so ingrained in me that it turned into one of those rules I would never think about violating.
That’s why, when I later opened my first credit card in high school, I never once thought about charging more than I could pay off each month. By that point, it was already a habit.
Those simple habits have also led to other positive side effects over the years. For example, because I still reconcile my bank and credit card accounts, I once caught instances of credit card fraud that would have otherwise gone undetected on my statements — several charges of $15 or less that weren’t mine.
Expense Tracking and Budgeting
Because I had my “own” money as a young teen, it motivated me to track it. At first I kept paper ledgers, and then later developed my own spreadsheet system I still use today. Because I could only spend what I had saved, I quickly developed an appreciation of how much things cost.
For example, in my teens I was obsessed with golf and used to play in tournaments throughout my home state of Iowa. Because I could only spend what I had saved in my account, I had to budget tournament entry fees. Later, when I turned 16 and was driving to these tournaments on my own, I calculated how much gas and food money each tournament would cost me based on its location.
Developing those simple habits allowed me to graduate high school with my own net worth, allowed me to increase my net worth during college and graduate school, and set me financially free as an adult to pursue my own desires without money being a factor in my decision-making.
Education About Opportunity Cost
My checking account also taught me about opportunity cost before I formally learned what that term means. Going back to the example of my summer golf tournaments, I quickly learned I had a choice with my money: I could either spend it on going to a tournament, or I could keep it saved in my bank account for something else.
As my golfing skills in high school later leveled out and started tapering, my firsthand experience in opportunity cost made me realize during the summer before my senior year that the costs of all the tournaments were no longer worth it. Instead, I devoted more of my time that summer to literally growing my money via a sweet corn patch on our farm that I sold to grocery stores and at farmer’s markets.
That’s when the value of my own checking account really started to take off.
The Desire to Succeed and Be Independent
When I saw I could make my checking account climb dramatically through my own efforts, I wanted to grow it as quickly as I could. By the end of high school, I already calculated what I needed to “retire” and set goals for how fast I could be financially free.
It also led to a few decisions in my life that left outside observers scratching their heads. For example, as an undergrad I served as a teaching assistant for a well-known economist and lawyer. He urged me to apply for law school. I had excellent grades and a good LSAT score. My decision came down to going to an Ivy League law school, which would have cost me out-of-pocket around $150,000 at the time, or going to our public state school with a full-ride scholarship.
I sat down and calculated the future opportunity cost between spending that amount of money in the present versus being able to save and invest my money throughout law school and beyond. The difference in my financial future wasn’t even close, especially when I considered my own personal values of where I wanted to live and what I wanted to eventually do. I chose the state school.
I also learned having that kind of control over my finances set me free and didn’t allow anybody to “control” me. As I started my working career, I saw far too many people who were stuck to their jobs. They were so dependent on their next paycheck that they lived in constant fear of losing their jobs, even when they hated their jobs.
That’s also why several people I knew were baffled when I left a job a few years ago without any plans for doing something else at the time. I knew at the time I wasn’t doing something I was passionate about, I wasn’t going to keep doing it, and money had no control over me.
Looking back on things, I firmly believe I have only been able to “pivot” my career and freely pursue my desires and passions because of the money habits I developed with that checking account as a teen.
A Sense of Importance
Finally, my last reason for why your child should open a checking account is the sense of importance it gave me. I felt like I was conducting “business” when I needed to go to the bank to deposit a check or when I wrote out my own check for a tournament entry fee.
In fact, I still clearly remember writing my first checks. I felt important and independent. Even though checks are quickly becoming a relic of the past, I am sure your child will feel the same sense of importance the first time she pulls out her own debit card to pay for her own clothes.
I also clearly remember my first trip to my undergraduate college registrar’s office to pay my first tuition bill. That was by far the largest check I had written up to that point. It motivated me to a) not waste my time at college, and b) to pursue even more scholarships so that I didn’t have to continue paying those kinds of bills.
Setting Your Child Free
As parents, you also have to accept the freedom that financial independence gives your child. I’ve made several decisions in my life along the way that didn’t make my parents happy. The good part for them is that I’ve never moved in with them or asked for a single dollar since moving out of the house two weeks after graduating high school. The bad part for them is that they also never had any “financial leverage” over me once I moved out of the house to force me to alter decisions they didn’t like.
So I urge all of you parents out there to let your child learn the responsibility of opening that first checking account and allow yourselves to set them free!
Tim Van Pelt is a financial planner and registered investment advisor representative of Steele Capital Management Inc. The views expressed in this article are solely his and do not necessarily reflect the views of Steele Capital or its management. You can reach him at tjvanpelt@gmail.com or (608) 577-9877. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, investing, tax, legal, or accounting advice. You should consult your own investment, tax, legal, and accounting advisors before engaging in any transaction.
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