Why Your Kids Should Have A Youth Account

Ellie Lott

Ellie Lott
Guest Blogger
youngandtheinvested.com

“Ellie is passionate about millennial financial planning and uses her website to help educate her generation on making smart decisions with their money.”

Why your kids should have a youth account
Children are rarely too young to be taught financial education. A study conducted at the University of Michigan Center for Human Growth and Development indicated that children as young as five have already developed emotional reactions to saving and spending money.

One of the roles of parents/guardians in their kids’ lives is to protect and nurture them into independent and responsible members of society. While living with the young ones may be fun, one day they will inevitably have to leave home to fend for themselves. Often, financial independence is an indicator of whether they are ready to sustain themselves. Opening a youth account is a great way to kick-start your kids on the path to financial success.

What is a Youth Account?

The US law prohibits minors from opening a bank account. However, this should not prevent them from having a savings account. A youth account is a savings account that is under the minor’s name with a custodian as joint on the account. In most cases, the adult manages the account until the minor turns eighteen, although the age may vary depending on the financial institution. The adult plays a supervisory role and may impose certain controls such as setting a withdrawal limit to ensure it is well-managed.

Benefits of a Youth Account

Besides the obvious reason which is to gain interest in their savings, here is why you should encourage your kids to open a youth account and develop healthy financial habits.

1. They learn financial literacy

Financial management is an essential life skill that is not taught conventionally in a classroom. Since not everyone grows up in a family where money matters are taught, when teens have their own money in their accounts, they are likely to learn a lot about managing their finances. From the basics of how to set financial goals and budgeting to the more complex issues of how to manage debt. Having a youth account goes a long way in enabling kids, teens, and young adults to take full control of their financial future and possibly pass on the acquired knowledge to friends or family in the future.

2. Cultivates responsibility

A savings account enables kids to keep track of their contributions, savings as well as withdrawals. This teaches them, from a tender age, the correlation between choices and consequences. The more they save, the faster they can achieve their financial goal. This is not attainable without regularly contributing to the account and resisting the urge to spend.

3. Teaches them the value of investing

As a kid, grasping the concept of interest may be difficult. However, a youth account simplifies it by practically showing kids how their savings increase over time. It teaches them practically how saving not only safeguards their money but can also earn them more money. As their savings increase, so does the interest earned. Since most accounts can be accessed digitally, they can notice any interest earned on their savings, however small it may be.

4. Develops their banking relationship

Developing a relationship with financial professionals is another great bonus. For starters, your kids can better utilize the services offered in financial institutions. Credit unions offer many other services besides savings and checking accounts. They offer services like budgeting basics, debt consolidation services, and ultimately the best stock picking services for the long term.

Having a financial specialist could go a long way in ensuring children achieve their financial goals. In developing a one-on-one relationship with the credit union, they may appropriately analyze your child’s spending and saving habits and offer advice. They can assist the child beyond verifying his/her deposit and in this way, he/she becomes more than just an account number.

5. Teaches compassion and perspective

In some ways, a youth account can help kids understand how financial resources are tied to what people have and don’t have. Through this, they can start to form a bigger picture about life and how some people are more or less fortunate than others.

Additionally, the simple act of saving, watching their money grow, and using their money to buy what they need teaches them that to purchase things in the future, one needs to budget and save. It also enables them to understand that as a family, certain sacrifices need to be made to meet certain financial obligations.

6. Prepares them to be financially independent

As kids grow up, they often express a desire to handle bigger responsibilities. What better way to ensure they do this by helping them open a youth account? In opening one, they are entrusted with the responsibility of managing their funds. There is no more begging or pleading for money, what they save is what they get. Having the ability to budget, reference previous spending, and curb their enthusiasm to overspend their money prepares them to be financially independent adults.

Closing thoughts

There is no right time for kids to open an account, but given life’s unpredictable nature, having a youth account would secure your child’s financial future and teach them at the same time.

If you’re ready to open a youth account, visit Freedom’s Youth Account Webpage to learn about their tiered options and other youth financial products.  Depending on your employer, you may also qualify for a $25 youth match. Ask by calling 800-440-4120 or email [email protected].

About Freedom Federal Credit Union

Freedom Federal Credit Union is proud to be your financial partner. Freedom serves and is open to anyone who lives, works, worships, attends school, volunteers, or has family in Harford or Baltimore County, MD. As a credit union, we are committed to putting you first, not shareholders, and helping you achieve your financial goals.

Learn more at freedomfcu.org/personal/youth-accounts or call us 800-440-4120 to see how we can help. 

Credit Cards: Reading the Fine Print

Girl holding a magnifying glass to her eye

Q: How do I read the fine print from my credit card issuer?

A: Fine print often has information you can’t afford to miss. Here’s the big deal on the small print found on credit card paperwork:

What do all those terms mean?

First, let’s take a look at 10 basic credit card terms that are important to know but are often misunderstood:

  • Accrued interest – The amount of interest incurred on the credit card balance as of a specific date.
  • Annual Percentage Rate (APR) – The rate of interest paid on a carried credit card balance each year.
  • Annual fee – The yearly fee a financial institution or credit card company charges you for having the card.
  • Balance – the amount of money owed on a credit card.
  • Billing cycle – The amount of time between the last statement closing date and the next one.
  • Cash advance – Money withdrawn from your credit card account, usually with higher interest rates and attached fees.
  • Credit limit – The maximum amount of money that can be charged to your credit card.
  • Grace period – The time the consumer has between making a purchase and being charged interest.
  • Late payment notice and fee – These will alert you to a missed payment and its fee for missing it.
  • Minimum payment – The smallest amount of money the consumer can pay each month to keep the account current and avoid fees.

Do I need to read the small print on my credit card application?

Those microscopic letters on your credit card application contain important information. Here are some common claims you might find on an application and what the small print below these claims actually says:

Claim: Sign-up bonus: $950!

Fine print: Must spend $3,000 on the card within the first three months of ownership.

Claim: Interest-free offer!

Fine print: Expires after 18 months, and then a 22.5% interest rate kicks in.

Claim: 0% balance transfer!

Fine print: But there is a $300 balance transfer fee.

Claim: Cash advance of up to $1,500!

Fine print: With 20% interest and a $200 cash-advance fee.

How do I find the fine print on my credit card application or statement? 

Read the fine print before you sign up for a credit card. You’ll find this information on the credit card’s paper or digital application under a label marked “Pricing and Terms” or “Terms and Conditions.” You can also find this information when researching credit cards online; it may be labeled as “Interest Rates and Fees” or “Offer Details.”

If you’ve already signed up for the card, you’ll find these conditions on the “Cardmember Agreement” that generally comes with a new credit card.

Your credit card statements will also have lots of fine print, though most of it will be on the back of the bill. The information there will include everything in your application, as well as some additional information about your monthly bill.

Your Turn: Have you ever regretted missing the fine print on your credit card paperwork? Tell us about it on Facebook, Twitter, or Instagram. @FreedomFedCU

About Freedom Federal Credit Union

Freedom Federal Credit Union is proud to be your financial partner. Freedom serves and is open to anyone who lives, works, worships, attends school, volunteers, or has family in Harford or Baltimore County, MD. As a credit union, we are committed to putting you first, not shareholders, and helping you achieve your financial goals.

Learn more at freedomfcu.org/personal/credit-cards or call us 800-440-4120 to see how we can help. 

How Do I Give Myself an End-of-Year Financial Review?

Year End Financial Check Up

Freedom Federal Credit Union Recommends This 6-Step Financial Check-up Before 2021

Q: With 2020 drawing to a close, I’d love to give myself an end-of-year financial review before it goes.  Where do I begin?

A: Giving yourself an end-of-year financial review is a wonderful way to check on the progress you’ve made toward your goals, highlight areas needing improvement and update your accounts, funds and investments. Here’s all you need to know about this important end-of-year ritual from Freedom Federal Credit Union.

 

Step 1: Review all your debts and create a payoff plan

Take a few minutes to list all your debts and their interest rates. Have you made any real progress toward paying them off this year? Or have you stuck with minimal payments each month, leaving the actual balance to pile up since you’re mostly just paying for interest?

If your debt needs some help, you have two primary options for how to proceed:

  • The avalanche method. Focus on paying off the debt with the highest interest rate first, and then continue to the debt with the second-highest interest rate. Move through the list until you’ve paid off all debts.
  • The snowball method. Work your way through your debts, starting with the lowest-balance debt. Then, once it’s paid off, apply the payment that was previously committed to that debt to your new lowest debt. Repeat through the rest until all debts are paid off.

For both methods, be sure to pay the minimum balance on all your other debts each month. Try to boost your income and/or trim your monthly spending for extra cash and use it toward the first debt you are paying off completely.

Step 2: Automate your savings

Review your savings from 2020. Have you reached your goals? Have you forgotten to put money into savings each month?

Going forward, make it easy by automating your savings. Give us a call at to set up an automatic monthly transfer from your checking account to your savings account. [You can also set this up through your online and/or mobile banking with us.] This way, you’ll never forget to put money into savings again.

Step 3: Review the progress you have (or haven’t) made on financial goals

Have you made measurable progress toward your financial goals in 2020?

Take a few minutes to review your past goals, taking note of your progress and determining how you can move toward achieving them.

Step 4: Review your retirement account(s) and investments

As you work through this crucial step, be sure to review the following variables:

  • Your employer’s matching contributions. Are you taking advantage of this free money, or leaving some of it on the table?
  • The maximum IRA contribution limits for 2021. You will likely need to make adjustments for the coming year.
  • Management fees and expense ratios for your investments. Fees should ideally be less than 0.1%.
  • Your stock/bond ratio and investing style. You may want to take more risks in 2021 or decide to play it safer this year.
  • Your portfolio’s balance. Does it need adjusting?
Step 5: Create an ICE Binder

The events of 2020 underscored the importance of making plans in case one becomes incapacitated for any reason. Create an In-Case-of-Emergency (ICE) Binder to hold all your important documents in one place in case the unthinkable happens. Because of the sensitive nature of the information it holds, be sure to keep this in a safe place where it will not fall into the hands of identity thieves.

Include the following in your binder:

  • Medical information
  • Account information
  • Child care and pet care details
  • Online accounts and passwords
  • Insurance policy documentation and details
  • Investment accounts and details
  • A copy of your life insurance policy
  • A copy of your living will
  • A copy of your last will and testament

Step 6: Set new financial goals for 2021

As you finish reviewing your financial progress of the past year, look forward to accomplishing greater financial goals in the coming year.

A great way to turn dreams into reality is to set goals that are SMART:

Specific

Measurable

Attainable

Realistic

Timely

Here are some goals you may want to set for the coming year:

  • Create a monthly budget before January. Be sure to include all expense categories. Review on the first of each month and tweak as necessary.
  • Review the week’s spending with your partner each Friday night.
  • Pay off your largest credit card bill by 2022.
  • Start a vacation fund in February.
  • Cut out two subscriptions you don’t really use by mid-year.
  • Slash your weekly grocery bill by 10% before May.

Wishing you a financially healthy New Year!

Your Turn: Do you have any additional steps for your own end-of-year financial review?  Tell us about it on Facebook, Twitter, or Instagram. @FreedomFedCU