So, your teen is looking for their first solo bank account. You want to give them good advice, but you're not really sure where to start?

In this blog, I will take you through the steps to get your teen to choose their first awesome bank account. I mean, it's easy to choose any bank account, but we want to set them up for a great financial future.

No doubt you have been teaching your child about saving their pocket money since they were knee high but now it's time for them to get a job or to take control of their own bank accounts. Most banks allow this from age 12, however not every bank will. Some will still require parental oversight until age 15 or higher.

Your teen having first steps into financial independence is a HUGE change in any family. It might go unnoticed in some as the busyness of the days get in the way but this is your child's first chance at being responsible for their own personal finances. As the parent, you get to lead the way like you have done with everything your child has done so far in their lives.

Finances and money touch so much of everyone's life, this one is important to get right. You get to set a great tone for your child to understand how to research and choose the best financial products for them and start great money habits.

Aren't all banks the same?

Far from it! There are so many different banking institutions. There are national banks, like the Big 4 (Commonwealth Bank, National Australia Bank, Westpac and Australia and New Zealand Bank); foreign banks like HSBC; bricks and mortar banks that still have physical offices; there are online only banks like Ubank, Up, ING; there are credit unions, which are not-for-profit banks; and there are building societies, which are for profit but they return the profits to their members, which are the bank account holders.

Out of all of the banks, here is my thoughts on how to choose the best for your teen.

1. Access technology

Our kids are technology savvy. Most banks now have online facilities with smart technology such as digital wallets such as Google Wallet, Apple Pay, Samsung Pay and more. Your teens can even access their accounts from smartwatches. Accessing and utilising technology is familiar in the teen world. Let's keep them in their comfort zone and not discourage using a bank if it is online only.

Yes, even with this technology, I believe teens need a physical card. There are too many places that still require a physical card and it is a nice safety net. It is also necessary to insert a card at many places to avoid credit card fees. Tap and Go is a wonderful feature, but if it has credit card fees attached then your teen must learn to use the debit account and PIN to avoid additional fees. Why throw good money away? Remember, wealth is about what you keep, not what you can spend.

 2. Spend AND Save

It is IMPERATIVE, that your teen learns that you spend AND save. They go together - there MUST NOT be one without the other. The way you get your teen to understand this is to let them know that wealthy people do not spend their money. They save, save, save (invest, invest, invest, repeat, repeat, repeat). Rich people - the ones who want to look like they have money - they are the ones that spend without care for saving or building wealth.

The 'rich' are usually the ones that end up with high credit card debts and bankruptcies later in life. The more your teen saves, the wealthier they have the chance to become because having available cash allows your teen to take advantage of opportunities when they come.

Learning self control around spending is the single most important finance skill you can teach your child. If you are no good at it, use yourself as an example of what not to do. If you are good at it, use yourself as an example of what to do. Whatever you do, talk to your teen about all things money and money management.

So, for your teen, we are going to choose a bank account that has a transaction AND savings account. As your child's funds increase I suggest splitting this across two banks, (there's a whole other world of reasons why to do this and I will cover that in the future) but for now while they have under $20,000 in the bank and are learning to manage bank accounts, one bank is enough.

Promise me you will not go and get your teen 6 bank accounts because a 'finance guru' suggested it. There's a place for that, but it is not for teens learning good money habits. I would only recommend that method for adults who have not learned to manage finances well and need other levels of accountability or whose mind works best with neat 'buckets' of funds.

So, your teen is looking for an online bank, where they can access technology, spend AND save all whilst building their wealth then they will want one that also rewards saving with a high interest savings account (HISA) and has no fees attached, which would erode their funds and their wealth over time.

 The bank for teens

Until recently I always preferred the ING account for teens, however I am so disappointed to say that they no longer offer a product for under 18 year olds. Whilst that is frustrating, I have found one that is similar and still provides the majority of benefits but has a better savings interest rate.

Great Southern Bank (formerly CUA) has a Youth eSaver Account. 

Here's what I like about the Great Southern Bank Youth eSaver Account*:

- No account keeping fees or mobile transaction fees

- Major bonus is that you can transact in the eSaver account without it affecting your Savings Bonus.

- Current savings bonus (as at 11th April 2023) is 5.10% variable rate!! WOWSERS!!! Find that anywhere else and I will be impressed!

This account does not have the same favourable ATM fee waiver and the international ATM and international free fees that ING had. This account will be better used for those wanting to make online or EFT transactions within Australia only.

My daughter prefers Up Bank because they had a free $10 sign up bonus... your teen can choose any account that they have considered is right for them.

Recap of what to consider for your teen

1. Does the bank allow individual accounts for the age of my child?

2. Does the bank have online and smart technologies?

3. Does the bank have a linked transaction AND savings account?

4. Does the bank have no fees, high interest on savings accounts as well as the features my teen will need like OSKO, ATM card?

5. Your teen might also like to consider community impacts of banking. There are numerous mutual banks like Heritage Bank, where the benefits go to members, rather than banks like the Big 4, where the bank is profit driven for shareholders. However, this is a personal choice and something that might be considered later as they become more aware of their social impact.

How to approach your teen

1. Let your teen know that you are excited for them to start their own bank account.

2. Discuss with them the importance of personal money management.

3. Let your teen know that the choice is theirs but you need them to consider the importance of:

- technology now and in the future

- developing great habits that will lead to opportunities in the future

- a monthly check-in with you to see how their spending v savings is going (as a teen, they have no financial responsibilities so their spending and savings should be reversed to an adult - save 90% and spend 10%)

- considering banks that have no fees

- ensuring that the bank they choose rewards savings with high interest

- understanding any conditions on bonus fees and interest such as maximum withdrawals etc

Give your teen your suggestion. If you don't want to go with ING, start researching online for one that has considered all these things and present that one to your teen. Explain to your teen why you think that one is the best and how it meets all the important considerations. Once you have finished, invite your teen to use that information to research a bank they might like to use.

Once you both agree on a bank, go ahead and open it and don't forget your monthly check-ins.

Set ground rules for spending and card use

Now your teen has their own bank account, ground rules that suit your family values are essential. Discuss what sites they can and can't buy from. What products they can and can't buy. How they share with friends and how they make charitable donations. All of this is essential to good money habits but also to keep your teen safe.

Discuss how online, phone and text scams works so your teen does not fall victim. Remember, your teen doesn't yet know how a bank is supposed to act, so they are a little vulnerable at first to scammers. I would suggest that they use your mobile phone number to set up their bank account so that any requests to re-set passwords come to you, the parent, first. This way you can monitor access to the account until your teen is familiar with usual banking procedures.

Once ground rules are established and good money management conversations are being held monthly, watch as your teen rises to the occasion and possibly surpasses your knowledge in no time!

Conclusion

These are exciting times to help your teen learn great money habits. Their own bank account is the first real financial responsibility they will have. You are perfectly positioned to guide them through this time in a very healthy way and setting them up with great money habits.

Youth bank accounts are created especially for teens. Work together to find one that has savings and transaction accounts linked with no fees and high interest for savings and you are well on your way to getting your teen to pick an awesome bank account! 

The Great Southern Bank Youth eSaver account is worth a look but please do not take this as a recommendation or advice as I do not know your particular circumstances. Use the information in this blog for educational purposes to understand the features your teen should look for and how you can best help them achieve that.