When should you get your child a bank account?

Personal banking has become more convenient than ever, making it possible for parents who open accounts for their children to monitor their activity, and to teach them sound financial habits whenever they feel ready.

Rick Wilking/Reuters/File
Bank teller Tyler Wong talks to a customer at the Wells Fargo bank in Denver.

Teaching children how to manage money is critical to ensuring their future economic success. Parents can begin with the easy step of opening a bank account in their child's name. However, even many adults have trouble handling their finances, so it's not surprising that people worry about overwhelming their children too early on with a bank account or debit card. Fortunately, personal banking has become more convenient than ever, making it possible for parents to open accounts for their children to monitor their activity and teach them sound financial habits whenever they feel ready.

What's the Right Age for a Bank Account?

The proper age for a bank account is mostly up to the parent. While banks usually limit checking accounts to teens, savings accounts for your child's college education or future career can be started at practically any age. With even small monthly payments, you still earn interest on the balance, which can help those regular deposits grow into a significant asset by the time your child is ready to access the account. Because savings accounts don't involve everyday use, the benefit here is more financial than educational. As your child gets older, you'll want to consider opening other types of accounts to help her learn through direct experience.

Think about opening a checking account for your child as soon as you feel he or she is capable of learning how to use one. All students learn at their own pace, and the only age limit you need to worry about is the requirement set by the bank you choose. Typically, banks provide student checking accounts for minors age 13 or older, as long as an adult parent or guardian signs as a co-owner of the account. Once your child turns 18 years old, most banks automatically convert the student account into a standard checking account, which usually come with slightly higher monthly fees than student accounts.

How Can I Keep an Eye on My Child's Money?

Plenty of adults feel confusion about their bank accounts, so it's reasonable to worry about your child getting in over his head with account fees and overdrafts. Fortunately, online banking makes it easier than ever to manage money at any time and place. You can use mobile apps or the bank's website to monitor the student account's balance and transaction history. With student accounts, many banks also offer parental alerts in case of overspending, so that you stay updated with any unwanted activity from your child. And as co-owners for the account, parents will receive a paper or electronic statement history for the student account.

What Will a Child Learn From Having an Account?

Opening an account for your child may be more important than you realize. Financial literacy is a regular topic of discussion among educators in the U.S. In the 2015 OECD survey of educational standards among 72 countries, American students scored below average on the section testing their knowledge of personal finances. This implies that students often miss out on the kind of education that parents can easily provide by introducing the concept of banking early on. A bank account lets parents teach their children everything from using a debit card to larger concepts like monthly budgeting and maximizing savings account interest.

Using a bank account provides students with a wealth of practical knowledge. Experience is often a more effective teacher than any amount of classroom instruction, and with money involved, the stakes are clear and immediately relevant to a child's life. The earlier a child can start using a checking account, the earlier he or she has chances to learn about how to avoid overdraft fees, bounced checks and drained balances. Giving your children a place to make mistakes in a controlled setting will equip them with the habits and information they need to grow into financially stable adults.

Are There Other Options Besides a Bank Account?

Prepaid debit cards are a popular alternative to traditional checking. Also called reloadable cards, these cards work much like gift cards in that a cardholder can never spend more than the amount loaded into the card. Otherwise, prepaid cards let you make ATM withdrawals and debit purchases just like a regular debit or credit card. With no risk of overdraft fees and a similar experience to "real" cards, prepaid debit cards are a good way to provide practical experience for your child while also protecting their money from overdraft fees and overspending.

Most major banks issue their own prepaid cards that can be linked to regular accounts, allowing parents to schedule regular transfers from their own checking account to a child's prepaid card. By replacing a cash allowance with regular transfers, you can introduce your child to the idea of making purchases through the use of an electronic account. Prepaid card programs at major banks also allow users to examine their transaction history through the same online apps and sites as regular deposit accounts, so your child will have the same chance at learning how to manage her finances as she would with a student checking account.

This story originally appeared on ValuePenguin.

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