Personal Finance Archives

When Should Your Child Get a Checking Account?

August 10, 2020 By MelissaB Leave a Comment

My oldest child has always had an interest in spending money and being independent, so I shouldn’t have been surprised when he wanted to open a checking account, but I was. After all, I rarely use my own checking account. I didn’t think a 13-year old would want one, but he was adamant he did. It turns out, he was smart to want a checking account from such a young age, and I’m glad we let him open one.

When Should Your Child Get a Checking Account?

There’s no hard and fast rule when your you child should get a checking account, but if the child is asking for one, it’s probably time. That may happen when the child is 13 like my son was, or it may not happen until the child is 16 and working her first job. (That’s when I got my checking account as a teen; I had no desire to have one before that.) Your child will let you know when she is ready for one. However, definitely by 16 or 17 she should open an account so she can practice managing her money before she moves away from home.

Have Safeguards in Place

Most banks require teens to have a parent co-sign on the account. As a parent, you can also receive copies of the monthly statements so you can make sure your child is managing his money properly.

However, some banks have more parental controls than others, so you’ll want to pick the bank in part based on how responsible your teen is. The bank our son chose had limited parental controls, but he didn’t really need them. However, some banks allow parents to set limits on daily withdrawals and to receive text alerts when the child withdraws money.

Debit Card Experience Is Invaluable

Having a debit card attached to the checking account is invaluable. Our child used actual checks sporadically, but he used his debit card all the time. He knew down to the penny how much money he had in his account, and he would frequently ride his bike down to the bank to deposit more money before planning on shopping.

What Having a Checking Account Taught Our Child

Our son was diligent about writing down his expenses and managing his balance. Still, one time early on he had an overdrawn account. Sure, I was co-owner on the account, but when he had overdraft fees, I didn’t pay them; he did.

He was so annoyed with himself, and he has never made that mistake again in years of having a checking account. I feel confident that when he’s on his own, he’ll be able to responsibly manage his checking account.

Final Thoughts

If you’re wondering when should your child get a checking account, the short answer is when she asks for one and is at least 13 years old. However, she definitely should open one by the time she’s 16 or 17 so she can prepare to be financially responsible when she leaves home.

How to Stay Afloat after Losing Your Job

January 6, 2020 By Susan Paige Leave a Comment

Losing your job is a really hard thing to face at any time, whether you saw it coming or not. You likely feel very overwhelmed with thoughts of how you are going to make rent next month or afford groceries next week. But it is important to keep a clear head and act fast to set yourself up for success as soon as possible so you can find new work.

Here are a few important steps that you should take within the first few days to week of your unemployment. They should help stabilize you and get you feeling sane enough to do what you need to do to find a new job.

First Step: Apply for Unemployment

If you qualify for it, make sure to start filing your unemployment claim on the day you lose your job. You may feel overwhelmed by the whole situation, but it’s worth it to start filing as soon as you can. The process to receive unemployment can sometimes take a few weeks.

Second Step: Look at What Savings You Have

Take a moment to look at what you have saved. Take inventory of your different accounts and what severance you may have gotten so you know how much you have and how long that might last you. For this type of situation, you can also dip into your emergency fund as losing your job unexpectedly definitely counts as an emergency.

Third Step: Tighten Your Budget

Now that you have a better idea of what actual cold hard cash you have at your disposal before you are able to obtain a new source of income, you can plan out a tightened budget. Yes, it’s not pleasant, but cutting a few costs out of your budget for the next few months won’t kill you. Temporarily cut out all the expenses that aren’t essential, like subscriptions, gym memberships, cable, coffee, eating out, etc. By tightening the wallet, you ensure that your savings last until you are able to find a new job.

Forth Step: Look After Your Debt

Next you should try to contact any creditors that you may have. If you reach out to them, they will be much more likely to help you out during a financial crisis. Lenders may offer options that could reduce or temporarily suspend your payments until you are employed again. The same goes for your student loans. If you call your student loan servicer, you could likely choose from several different options like deferment, forbearance, or an income-based repayment plan.

If you really don’t have enough savings to get you through this time, then maybe you need a loan to cover you until your unemployment kicks in. Whether you get a personal loan, credit union loan, title loan, or anything else, make sure you do your research so you’re aware of what you are getting yourself into before making any final financial decisions in the heat of the moment.

Get these things in order and then make job hunting your new full-time job. Following these steps is a sure-fire way to make things happen quickly. With determination and hard work, you won’t be unemployed for long and then you can get your finances back in order.

Image source: Eric Ferdinand

How to Build Your Financial Foundation

April 24, 2018 By Carter Kilmann 1 Comment

“Can I afford that?”

If you’ve ever asked yourself this question and not been sure of the answer, it’s time to establish your financial foundation.

Think of a gleaming, towering skyscraper. It didn’t appear out of thin air. It took months of preparation and carefully designed installation. Most importantly, that skyscraper’s construction started with its foundation. Then, floor-by-floor, it was eventually completed.

The key point here is that the foundation came first. It’s an absolute necessity to the stability and longevity of the building. Without it, the tower would crumble.

Your financial foundation works the exact same way.

Without a proper financial foundation, your finances will never be in perfect harmony and you will never be financially stable. Moreover, you’ll never relieve yourself of financial stress, which is a heavy burden too many people bear.

Financial foundations are an easy concept, but they take a mindful, dedicated approach to put together.

Sticking with the building theme, your foundation will consist of three “pillars”:

Short-term money
Emergency money
Long-term money

Pillar #1: Short-term money “STM”

Your STM reserve will be used to cover your active, day-to-day expenses. Think groceries, rent, utilities, etc. Although there isn’t a universal dollar amount, there is a guideline you should follow to determine how large your STM reserve should be.

Follow the below steps to determine your STM reserve:

Calculate the amount of money you usually spend in a month. If you use a debit or credit card, you can use your monthly account statements as estimates.
Take this dollar amount and multiply it be three.

That’s it! That number is the amount of money you should have set aside for your short-term expenses at any given time. For example, if your monthly expenses are $1,000, you should have $3,000 in your STM reserve. This covers the volatility and variance of your expenses.

Let’s face it, we’re all human. Some months you’re going to spend a little more than others, some months you’ll spend a little less. But with a STM reserve, you’re covered.

This will ease your day-to-day financial stress.

Pillar #2: Emergency money “EM”

Think of your EM reserve as a rainy-day fund. You can’t predict your next fender-bender or doctor’s visit. So, you need to have EM at the ready for such an occasion.

Again, there isn’t a universal dollar amount, but the calculation is easy: take that same monthly expenditure amount and multiply by six. Using our example from earlier, $1,000 multiplied by six would give us a $6,000 rainy-day fund.

See how easy this is? This number provides you six months of leeway if you were to ever lose your main source of income (i.e. your job). This gives you plenty of time to reestablish that income stream or find a new job.

Pillar #3: Long-term money “LTM”

We’ve accounted for your active expenses and potential, unexpected expenses. Now, it’s time to turn our attention to the future.

Your LTM is for your future goals, such as a house, graduate school, kids, etc. The sooner you prepare for those occurrences, the sooner you can take advantage of compound interest.

After satisfying your STM and EM reserves, you should contribute at least 20% of your monthly income to your LTM goals. If you’re making $3,000 a month, net of taxes, you’ll set aside $600. Want to reach your goals faster? Up that percentage.

And there’s your financial foundation blueprint!

Tie it all together

Construct these pillars by filling your reserves one-by-one, in the order listed. In other words, start off by focusing on your STM reserve. Once you’ve hit a comfortable point (i.e. about three months of expenses), move on to your EM. Lastly, after you’ve covered your short-term expenses and potential, spontaneous expenditures, you’ll start investing in your future.

A solid, formidable financial foundation is integral to financial success. These three pillars will provide clarity to your financial horizon and ease your financial stress. I know it’s easier said than done, especially if you’re living paycheck-to-paycheck. If that’s the case and you’re barely breaking even, create a budget and cut back on discretionary, non-essential expenses. Or, commit some of your free-time to building a secondary source of income. That way you’ll be on your way to sitting pretty at the top of your skyscraper!