This initial stage of adulthood is one of major discovery. Everything is new. After I graduated from high school, I moved several states away into an apartment for the very first time and began school part-time (which I did for one year before going full-time). I really didn't have much concept of paying bills and am lucky that I lived with someone that could provide me with a bit of guidance. I am also lucky that the job I landed just after that move was in a local credit union. I really didn't know much about banking at the time. So, while I learned how to help members, I was also able to learn how to navigate banking for myself. Had I not started working at the credit union and had the guidance of someone that had experience managing their accounts and bills, I'm certain I would have been completely lost.
I know that lately, I've been writing a lot about how our mindset impacts our financial lives because I believe that one of the cornerstones of building a healthy financial future lies in developing a positive relationship with money. The other component is knowledge. While I believe that mindset is a huge component, there are a few things that we simply need to know. So with that, there are a few things I want our kids to know (about banking).
Free is key! When you go to a bank or credit union and ask to open an account be prepared to bring your ID; you will also need to give your SSN to them. Make sure you ask for the "free checking" account. Oftentimes, banks and credit unions have a free version of the checking account and a version that has a monthly fee involved. You want the free one when you are just starting out.
Minimum Balance Requirement: When you open a checking or savings account, find out if there is a minimum balance requirement. Ideally, you want the one that doesn't have this. But if there is a minimum balance requirement, how much is it? Are you required to keep $100 in the checking or savings? Is it more? What happens if you drop below that? Will you be assessed a fee? If so, how much is that fee? Is that fee waived if you set up direct deposit to go into the account?
Direct Deposit: Ask the person at the bank or credit union for the information for direct deposit. Use this information to set up a direct deposit with your employer. This means that on payday, your pay automatically goes into your account without you needed to collect a physical check and go to the bank or credit union. Warning: Be very careful with the direct deposit information. The same information that you will use to automatically put money into your account, can be used by someone to automatically take money out of your account. If this information falls into the wrong hands, you could have issues. By no means should you be overly paranoid about this, but you should be aware of the need to safeguard this information.
Automatic Savings Transfer: Consider setting your account up to automatically transfer a little money into your savings account every single payday. Be consistent. It is important that you build up a savings account so that you have money in case of an emergency. Set a goal for this! Aim first to build your savings to $500, then $1000. Emergencies happen! Take action to protect yourself.
NSF Fees: NSF stands for "nonsufficient funds." This means that you tried to spend money using your debit card or a check but there wasn't enough money in the account for it. If you do this, the bank or credit union will charge you hefty fees each and every time you do it. Oftentimes these fees are near $40 EACH! You seriously don't need to be buying yourself a $42 soda!
Online Banking/Mobile Banking: This should be a free service. Get set up for it and have them show you how to use it. Put the app on your phone, that way if you are about to make a purchase you can log in very quickly and make sure the money is there so you can avoid an NSF fee. This can also allow you to transfer money to and from savings. Let me repeat myself: Get the APP!
Overdraft Protection: The bank or credit union can help you protect yourself from NSF fees by setting you up with overdraft protection. What does this mean? If there's only $10 left in your account, and you spend $20, the bank can set it up so that your account will automatically transfer the difference from your savings if it's there. Additionally, find out what the fee is each time you use overdraft protection. It's usually around $5 each time, which adds up! If you use the mobile app or online banking to make the transfer yourself it should be free. So, that's the best choice. However, a $5 fee for overdraft protection is way cheaper than a $37 NSF fee!
Listen, there's plenty more to know and these are just the highlights, but you can do this. This is your future. Take it upon yourself to become educated about your money while you're young. I promise you, it's a choice you won't regret.
To my regular readers: I know this was a different sort of post for me. As graduation season is upon us, I've had the opportunity to reflect and kept feeling as though there were a few things I wanted our kids to know (about banking). If any of you are parents or educators and would like to hear a few more things I'd like our kids to know about, let me know in the comments.