Finances can be a blessing and a curse for young people, but knowing the basics will prepare for what’s to come. Banking is the first step in your financial journey.

This article is part of a series teaching essential personal finance concepts to teenagers. At Money Under 30, we believe that it’s never too early to become financially responsible; we hope this series will be a good place to start.

As a young adult hoping to drive for the first time, or one trying to start the journey towards college, banking will become a necessity. There’s a lot you need to know about banking that you unfortunately don’t learn in school.

Although getting a bank card is a big part of financial success, it’s by no means the end of what you need to know. Ever wondered what a checking account is, how to avoid an overdraft, and where all your money in a bank can go? Continue reading for a basic lesson on banking and how you can help clear your path to financial prosperity.

Savings accounts

If you’re serious about that car, college education, or other major goals, put your money where your mouth is and feed it to a savings account.

Keeping money in a savings accounts helps you prepare to make large purchases as time evolves and allows your money to grow. Lexington Wealth Management founder and president, David Dedman, recommends that you start putting away at least 10% of what you earn. That 10% accumulates over time and, while that might not sound like a lot, it could lead to a lot of benefits, possibly retiring early or purchasing your first home. A fraction of your money in a savings account can make a whole lot of difference.

You can choose a regular savings account, which is easy to set up at any bank and sign up for in person, though it may require a higher daily minimum balance requirement. Or, since you’re young and more tech savvy, there are also online savings accounts which you can access from anywhere and offer higher interest rates. These kinds of accounts show you that you have more wealth that you think you do, why not start now?

Checking accounts

Have you put some money away in your savings account, but got a bit too much cash on you and want somewhere to put it? A checking account helps you solve that problem.

Unlike savings accounts, checking accounts are accessible at any time. And you can access it in various ways—by depositing checks, using a debit card, or using your bank’s Automated Teller Machine (ATM). It keeps your money safe while covering you in case your debit card gets stolen. The bank can deactivate it so someone else can’t use it at will.

When accessing your account, make sure to keep your receipts or record each transaction you make to keep your spending to a minimum. Yes, checking accounts are excellent cash replacements, but that doesn’t mean you should go to it at a moment’s notice.

You’ll want to make sure your account has a healthy balance as most banks charge an overdraft fee for purchases that exceed your balance. Ask for overdraft protection, if applicable, but the best advice would be not to use your checking account for major purchases.

Linking your checking and savings accounts together can help you avoid overdraft fees in some cases, and enables you to move money with freedom from one account to another.

Money Market Accounts

Money Market Accounts (MMAs) and savings accounts function in similar ways. You deposit money into an account, you earn interest on that account. The biggest difference between the two is the fact that Money Market accounts earn significantly more in interest than traditional savings accounts.

However, it’s important to note at this point that MMAs have a higher minimum balance requirement (often in the thousands) to earn the top APY. This puts MMAs out of reach for many younger customers.

While MMAs function like savings accounts, they also function like checking accounts in a lot of ways. You can write checks from your account and also withdraw money. Some even come with debit cards.

Credit cards

When you don’t have cash, plastic seems like the way to go. But it’s far more than just a card. It holds your key towards taking the next step along the road to your financial destination.

Having a credit card allows you to build credit so you can boost your chances of making significant purchases such a car or renting a new apartment. If you’re under 18, your best bet is to talk your parents or guardians into adding you as an authorized user on their card. Banks such as American Express and Discover have minimum age requirements of 15 for potential cardholders, while others such as Citi and Wells Fargo have no age limits.

If you’re 18 and older, you can apply for a credit card without a parent or guardian’s assistance as long as you are making viable income. The Credit Card Act of 2009 requires all applicants under 21 to provide proof of income.

Should you be out of a job, you can still acquire a secured credit card, which requires you to make a security deposit before you’re allowed to use it. That deposit acts as collateral for the credit card should you be unable to pay it off in time.

You can also take on a co-signed account with your parent or guardian, but make sure to make your payments on time as late payments will affect their ratings just as much as yours.

Credit cards are not “free money” as you might think. You are essentially borrowing money from the bank, which is why you should reserve your credit card for purchases you’re sure you can pay back. Credit cards have high APRs—which are basically the interest rate you pay on your balance.

At the end of every month, you will receive a statement from the credit card company with your balance. From there, you have a grace period to pay the balance or else be charged interest or late fees. If you’re going to start using credit cards, get into the habit of paying them off in full and on time each month to avoid ever having to pay your APR.

Credit cards do have the option to pay a “minimum payment”. However, we do not recommend you make minimum payments because it will mean you still incur interest charges and you’ll carry the balance over to the next month.


Most people hear the word debt and associate feelings of dread and negativity with it. You never like to owe people; it just puts more pressure on you. There’s no such thing as ‘good’ debt right?

Well, there is. Some types of debt actually benefit you in the long run as they help improve your net worth and income-making ability. Whether it’s your college education, a small business that you own, or any short-term investments, these ventures show how fiscally responsible you can be. ‘Good’ debt allows you to buy what you need and deal with sudden emergencies.

It can also land you a good career if you play your cards right. The U.S. Bureau Labor of Statistics stated in 2016 that full-time workers over age 25 with only a high school diploma had a median weekly income of $679. For those with a bachelor’s degree, it’s $1,435. So don’t think taking out a student loan is a burden. It could actually ease one or two as long as you can pay it off.

Bad debt, on the contrary, does not improve your net worth or generate additional income. It includes car loans or outstanding credit card balances. Failure to pay those will hurt your credit rating and could take a while for you to recover from.

Bank statements

These statements help make life a little more comfortable, especially if you haven’t kept consistent records of your transactions. This statement is a printed record of your account balance, including detailed lists of deposits and withdrawals.

It helps to go through these with your parents in case specific terminology strikes you as odd, but these statements are straightforward and are either issued by mail or online.

Balancing your checkbook

Once you have received your bank statement and read it over, take up your transaction book and check off all items that are also in the statement. Then it’s time to make some additions and subtractions.

Add interest your bank has paid you while also subtracting any fees the bank charged you and any bounced checks. If the numbers don’t add up, make sure to call your bank and ask any necessary questions.

Potential situations like these should convince you to contribute more to your account in case you forget to record a transaction. The last thing you want is for your bank to call you about a bounced check or some discrepancy in your account you never saw coming.


Finances can be a blessing and a curse for young people, but knowing the basics will prepare for what’s to come. Do you feel like you don’t make enough to be able to engage in banking?

That’s the thing.

Banking gives you a chance to make a lot, even when you don’t have a lot. Money can always grow over time. Once you have it saved in the right places, it’ll come in handy when you need it most. Armed with this knowledge, you will fire your way to wealth you never knew you could achieve.

Read more about finances for teens

Banking 101—A Guide For Teenagers (And Anyone Who Needs A Refresher)

Budgeting For Teens—Grow Your Money While You’re Young

How To Make Money—A Guide For Teens

How Teens Can Save Money

How To Spend Money Wisely—A Guide For Teens

7 Tips On Saving For College As A Teen

The 8 Most Important Employee Rights Teens Should Know

Credit Card Basics

6 Money Lessons Our Parents Learned In School, But We Didn’t

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About the author

Chris Muller picture
Total Articles: 285
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter.