Financial Tips for Teens, Part 1 of 3

Published on May 13th, 2016

The end of the school year is rapidly approaching and our high school seniors will soon be graduates. Whether your graduates will be going away to school, staying local for school, or looking to join the work force, it’s a great time to pass along some financial knowledge before they can get themselves into real trouble. It’s much easier and much less expensive to stop financial mistakes, rather than trying to clean them up in the future.

I don’t know how much financial education is now taught at the high school level, but when I went to East Leyden, the college prep courses that I took only had the barest minimum of financial education requirements. I was fortunate to have a couple of personal finance classes in college that set me up on the right path and helped me avoid costly mistakes.

The three main areas of financial education that should be taught to everybody are budgeting, how to handle a checking account, and the importance of having good credit.

Budgeting is something that can be taught to young children, the younger the better. The earlier the foundation in good financial management is laid, the better that it will take hold and the lessons will be retained. Since I’ve previously discussed budgeting, I won’t spend much column space here discussing it further with one exception. It’s a great idea to give kids jobs to do around the house (cleaning rooms, doing dishes, taking out the trash, etc.) to earn their “allowances”. From an early age the kids will learn that to get something (allowance), they have to work for it. Once the chores are done, the money is paid out and they can do whatever they want with it. However, it should be discussed with them on how they want to spend it? Do they want to spend it all on inexpensive things that they can get right away? Or, are there any bigger ticket items that they want to save up for? If so, you can show them how to put some money aside each week and save it for the bigger item that they want to buy.

Back to the main topic of this column. What does your teen need to know about finances as they become an adult? One of the first things that I would teach them is how to handle a checking account and why it’s important to keep the account in good standing. It’s also a good idea to show them how to shop around for the best deal when it comes to checking accounts. There are a lot of options available and you want to make sure that they find an account that meets their needs and fits their lifestyle.

If not handled properly, checking accounts can become very costly, very quickly. Not sufficient funds fees can be as high as $35 per item. Monthly maintenance fees average $12 a month at a couple of local banks if you don’t meet their direct deposit or balance requirements. Shop around at a couple of the local financial institutions and ask about their fee schedules and what’s necessary to avoid the fees.

Improper handling of checking accounts can lead to getting sent to collections for monies owed and/or being reported to Chex Systems. Chex Systems is a database that most financial institutions contribute to and it’s used to identify account abuse by consumers. Once you’re in that database, it takes approximately seven years to be removed from the database. While you’re in the database, many financial institutions will not allow you to open a checking account, especially if funds are still owed.

So, if an account does get overdrawn and go negative, what should they do? They should NOT just walk away from the debt. They SHOULD talk to the financial institution and come up with a plan to bring the account current. It’s possible that the financial institution would work with them to reverse some of the fees if they weren’t constantly bouncing checks. They’ll have a much better chance of getting their issue resolved if they keep in touch with the financial institution and make good on any promises they make to the bank staff regarding making payments toward the monies owed.

Little problems, like a bounced check or two, can usually be resolved easily with a little timely attention. If you made an honest mistake, like forgetting about an automatic debit that was scheduled to hit when you wrote a check, pass on that information to your financial institution and ask if you can get your fee back. If it’s the first bounced check that you’ve had, or first in a long time and you’ve not had any fees recently reversed, there’s a chance that your fee could be returned to you. Explain what happened and why. Don’t expect to get the fee back, but it’s worth a try. As the saying goes, you miss one hundred percent of the shots that you never take.

In the next column, I’ll discuss the importance of having good credit, how to build your credit when you don’t have any, and what makes up a good personal credit profile. I’m always happy to answer any questions that readers may have and I can be reached via e-mail at david.lukas@leydencu.org.


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