Lessons for Teens - Money Management and Accessibility

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1 Money Management: Help Dollars Make Sense Emily Burris Hester, Coordinator Student Financial Management Center

2 Lesson 2: Opening an independent bank account If your child does not already have some sort of checking or bank account, it is most likely time to get one! Things to consider when making this decision: Ability to transfer funds Online Banking (who will have access?) ATMs & ATM Fees Overdraft Protections *Download Lesson 2 to have this conversation with your child once you get home!

3 Things to Know When you get money, whether it s from grants or scholarships paid directly to you, your Work-Study job, or your parents or guardians, it's best to deposit the money into a bank checking or savings account. Keeping your money in the bank is safer than cashing checks and much safer than keeping cash in your room or in your wallet. In addition, while you don't absolutely need a checking account (you can pay bills with money orders) it's less expensive to write checks from your checking account and helps develop skills you'll use the rest of your life. Furthermore, ATM and debit cards are linked to bank accounts, and these cards are almost necessities in our electronic world.

4 Managing Your Account Keep track of all your ATM, debit card, and credit card transactions. Be sure to maintain a record of all spending activity in your check register, or review your online transaction records, to ensure that you are aware of your account balance at all times. Write down all your transactions. Every time you write a check, or submit an electronic bill pay activity, record it. Write down the date, the check number (if applicable), the payee, and the amount. Then, subtract each transaction to keep an accurate running balance. Don't overdraw your account. If you write a check, or use your debit card, for more money than you have in your account, the account will be overdrawn and your bank may charge you a hefty fee. Overdrawing your account can also hurt your credit history, and if your bank notifies other banks about your overspending habits, you may be refused banking services from other banks in the future. Also remember that if you bounce a check, the store where you made the purchase may charge you a fee. (You may be able to get overdraft protection for your checking account but you'll pay interest and fees on the little loans the bank gives you to cover your bounced checks.)

5 Managing Your Account Consider duplicate records. If you just can't seem to get into the habit of recording your checks as you write them, order checks that have duplicates. If you bank online, print a bill pay summary that shows recent payments you have made. That way, you'll have an automatic record of your expenditures. Don't assume the ATM balance is correct. If you've written checks or submitted electronic payments that haven't cleared yet, the balance on your ATM receipt will be more than what you really have available. Balance your checking account every month. At the end of each month, compare your bank statement, or print a copy of your online account, in order to balance your checkbook. Compare the bank's information with your records. Review your math and see if you come up with the same final balance as your bank shows. If you see discrepancies or you don't understand how to do this, call the bank for help. You may be charged a fee, but it can be worth it to learn how to balance your checkbook. Report any suspicious activity to your bank immediately. The bank can place a freeze on your account so someone else doesn't use it.

6 Debit Cards VS. Credit Cards Pros: Debit cards offer a convenient way to buy things in a manner that is almost like writing a check, but faster. When you use your debit card, the purchase amount is subtracted from your bank balance almost immediately. Debit cards also: Can be used to obtain money from ATMs all over the world. Provide you with a receipt you can use to check your balance. Allow you to buy postage stamps at some ATMs. Allow you to make deposits or transfer funds between accounts. Allow you to make purchases online. Cons: One danger of carrying a debit card is the trouble you can get into if it is stolen. You can be held accountable for $500 worth of unauthorized purchases if a debit card theft is not reported within 48 hours. If you wait 60 days or more to report the loss, a thief can clean out your entire account. With debit cards you may also: Pay a quarterly or annual use fee. Pay a "point-of-sale" fee when swiping the card through a reader and entering your personal identification number. Pay a fee for using it at an ATM not owned by your bank.

7 Debit Cards VS. Credit Cards Pros: A major advantage of credit cards is personal liability limitation. With identity theft now a serious issue, the federal Truth in Lending law limits to $50 the amount a cardholder must pay if a credit card is stolen. Credit cards also: Offer a convenient purchase method when you don't have cash. Help you build up a credit history. Provide a source of money for emergencies. Are accepted by most stores. Offer benefits such as frequent flier miles. Allow you to make purchases online. Cons: A disadvantage to credit cards is they can be too convenient. You might appreciate that you can buy what you need without going to the bank to withdraw cash, but a credit card balance can get out of hand quickly. Credit card companies can also: Charge late payment fees of around $30. Charge annual use fees on many cards. Increase your interest rate, often in excess of 22%, if you miss a payment. May require you to spend $10,000 or $15,000--often on a dollar-per-mile basis-to get to that magic "free trip" number. Charge transaction fees on cash advances. Use "floating" annual interest rates that can go up without a notice.

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9 Thank you! For more information: LSU Student Financial Management Center B-4A Coates Hall (225)