How to monitor your teen's bank account
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In the blink of an eye your high schooler is driving and applying to colleges. He’s probably also going out with friends almost every weekend, buying gas for the car and saving up for something big, like a new laptop. Although you have done your best to raise a financially savvy teenager, you may still want to keep tabs on his spending.
Whether your child is still living with you and under your watchful eye or off at college, monitoring your kids’ spending can be almost as uncomfortable as discussing money with them. It gets particularly touchy when your kid is off at college and wants to handle money matters on their own – even if it’s your money they’re handling. No matter the situation your teen will likely make some poor spending choices sooner or later, and it will benefit you both to catch these money missteps early.
To this end, it’s important to have an honest talk with your child and explain that you’ll be checking on his spending. It’s also important to set a budget and ground rules about spending with your teen, especially if you are giving him an allowance. If he is earning his own money, you can also discuss the importance of budgeting so that he doesn’t have to ask you for extra spending money when the weekend rolls around. Although he might feel like you’re spying on him a little bit, it’d be worse if you didn’t talk about it beforehand. When you’re ready to start keeping tabs on your teen’s finances, here are two good ways to begin:
This way you can both view the account via an online banking portal. When my boys were 9 and 12, I opened Smart Saver Kids Club accounts for them at Sharon Credit Union. When they reached 13 and 16, I opened checking accounts for them at my primary bank, Citizens Bank. I linked both accounts to mine and monitor their expenses regularly.
My older son, now 20 and in college, still uses that checking account. His paycheck is directly deposited and he uses his linked debit card for daily expenses. Occasionally I call him because I notice ATM charges that he could have easily avoided or an excess of charges to places like Dunkin’ Donuts. It’s not that I don’t trust him. It’s just that I want him to stay on track and not spend frivolously.
He now appreciates that I look out for him. He even calls me to tell me about purchases that he knows I will notice. For example, he told me to expect a Best Buy debit charge. He purchased a new external hard drive and shopped around to find the best deal. Thatta boy.
Getting your teen a credit card is a great way to teach him about budgeting and spending. Just make sure you can keep close tabs on his account so he doesn’t overspend. You can either add him as an authorized user on your account or co-sign for his own card. If you want your teenager to start building his own credit, make sure your credit card company reports authorized users to the credit bureaus as some do not (call your credit card company to ask about this).
If you co-sign for your teen, you may want to start him off with a secured card which will limit the amount he can spend. If he is an authorized user, his charges will show up on your statement and if you co-sign, you can request a duplicate statement. Both ways give you an easy way to monitor his credit card spending. Note, however, that you’re ultimately responsible for any co-signed debt if your child goes on a spending spree.
Yet, even if you’re keeping an eye on his credit card activity, don’t be surprised if you see a late payment or notice that he only made a minimum payment instead of paying the entire bill. This doesn’t mean your teen is going down a dangerous path, but it does mean he may need a little guidance. You can step in and talk to him about how important it is to pay on time and in full. This paves the way to discuss how instances like this can negatively affect your credit history.
With this said, it’s important to regularly check your teen’s credit report. You can do this through any of the three major credit bureaus: TransUnion, Equifax or Experian. You can also get free credit reports through AnnualCreditReport.com.
Between monitoring your teen’s bank accounts, credit card activity, and credit reports, you should have a good idea of his spending habits. If you’ve implemented some of our tips for raising money-savvy kids and feel comfortable discussing money with your kids, your kids should have no problem keeping their spending in check.
If your kid spends too much, however, a short talk or quick text may not be enough. You may need to institute repercussions for poor spending habits.
As an extreme example, the 19-year-old son of a friend of mine decided to move out of his mother’s house and blew all the funds in his bank account to rent an apartment. This included money earmarked for college expenses. When his mom checked the account, it was empty. She had no idea where the money went. His mom had to abruptly put an end to monetary contributions to his bank account until he learned how to budget and save.
While the above example is the worst case scenario, discovering that your child went on a shopping spree at the mall is very common scenario, even with kids who are normally smart about their money. If this happens repeatedly, it may be time to close his checking account or take away the credit card – at least until you feel he’s ready to start spending wisely again.
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