April is financial literacy month, and many parents are focused on educating their children about smart money management and discipline following the economic meltdown.
When it comes to teaching children about using plastic payment methods, some personal finance professionals are discouraging parents from handing over prepaid and credit cards, and instead advising them to open checking accounts, according to Kiplinger. Opening an account in the teen's name and putting a limited amount of money in the account will give kids access to a debit card, and provide them with a practical lesson for managing their money.
Experts say community banks and credit unions are the best options for these accounts because they are flexible and offer the most affordable terms. In fact, local institutions have always been proponents of financial literacy and many offer financial education programs to their customers and members. In addition, community bank and credit union overdraft privilege programs tend to carry lower fees than megabanks, which provides teens with a safety net, but does not allow them to fall into heavy debt in the same way that a credit card would.
Overdraft fees at megabanks have risen to average $35, while community banks and credit unions carry overdraft charges of around $27.