Transitioning kids from dependent to self sufficient: bank and credit accounts

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ClassOf2021
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Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by ClassOf2021 »

Transitioning kids from dependent to self sufficient: bank and credit accounts

Situation: family of 4, twin 22 year olds in last year of college paid for by parents, both in business schools in Northeast, both have offers lined up starting after graduation at big 4 firms (one in Manhattan and one in Philadelphia). Currently the “kids” use our credit cards for their expenses, I ( retired this year, financially in good shape) tend to be the only one that reads (has interest in) our statements.

Question: to encourage the kid’s transitions, I would like to wean them from depending on our credit cards preferably before they start work. My thought is to offer them each a monthly stipend for their incidental expenses (not tuition and room/board) provided that they pay for these from their money using their accounts over Jan-May. My specific questions are:

Kids currently have a PNC accounts and debit card that was marketed to them at their schools. Is this bank the best choice for them post graduation?
Kids currently do not have credit cards. What would be good choices?

My current tendency would be that they both set up accounts at BOA (this is the bank we use and I am familiar with it but there may well be something better) and get a BOA rewards card (their primary card, this could simplify tracking and budgeting) along with a backup card somewhere else. They would still have access to our cards in case of emergency. Hopefully this would set them up to handle their finances well as they transition.
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ResearchMed
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by ResearchMed »

I think it is an excellent idea to help them get started so each of them has their own charge card.
Whether BoA is better than others, I can't say as I'm not familiar with that card.

This will help them pay more attention to their spending, and also get them started on their own credit history (unless perhaps they've got that going already as authorized users on your account).

But for starters, make SURE that they understand about paying the FULL balance each month, and neither gets sucked into the lure of "it's only 1.5% or 2% interest per month", etc.

RM
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HomeStretch
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by HomeStretch »

I added my kids as Authorized Users to one of my older credit cards. The AU card showed up on their credit history and helped build their credit score.

Consider Fidelity (or Schwab) as a one-stop shop over BofA for banking/brokerage services for your kids. Fidelity has a better range of products. BofA has minimum balance requirements for checking and savings accounts to avoid monthly fees.

My kids before graduation each opened a Fidelity Roth IRA and Cash Management Account (CMA) which functions as a checking account. The CMA has no account fee/minimum balance requirement, offers an ATM/debit card with free ATM withdrawals, free wires, accepts direct deposit, bill pay, etc. Having the CMA helped with Fidelity approving them for a 2% cash back rewards VISA card. There is a good online app that accepts mobile deposits.

Fidelity is running a promo to receive $100 when $50+ is deposited in a new account such as a CMA which means your kids can get “paid” to try out the account.
https://www.fidelity.com/go/special-offer

Edit - you can instantly transfer funds from your Fidelity account to your kids’ Fidelity accounts by calling a rep.
Last edited by HomeStretch on Sun Nov 28, 2021 8:15 am, edited 2 times in total.
andypanda
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by andypanda »

My suggestion:

Tell them to each open a checking account at BoA and get a credit card too. Then you can easily deposit a set monthly amount in the checking accounts and they can pay their credit card bill. Once they get the hang of it after a month or two they can use their paychecks.

If they each get a second card for backup, why do they need yours?

Does Big 4 refer to accounting firms? Just curious.
OnTrack2020
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by OnTrack2020 »

ClassOf2021 wrote: Sun Nov 28, 2021 6:40 am Transitioning kids from dependent to self sufficient: bank and credit accounts

Situation: family of 4, twin 22 year olds in last year of college paid for by parents, both in business schools in Northeast, both have offers lined up starting after graduation at big 4 firms (one in Manhattan and one in Philadelphia). Currently the “kids” use our credit cards for their expenses, I ( retired this year, financially in good shape) tend to be the only one that reads (has interest in) our statements.

Question: to encourage the kid’s transitions, I would like to wean them from depending on our credit cards preferably before they start work. My thought is to offer them each a monthly stipend for their incidental expenses (not tuition and room/board) provided that they pay for these from their money using their accounts over Jan-May. My specific questions are:

Kids currently have a PNC accounts and debit card that was marketed to them at their schools. Is this bank the best choice for them post graduation?
Kids currently do not have credit cards. What would be good choices?

My current tendency would be that they both set up accounts at BOA (this is the bank we use and I am familiar with it but there may well be something better) and get a BOA rewards card (their primary card, this could simplify tracking and budgeting) along with a backup card somewhere else. They would still have access to our cards in case of emergency. Hopefully this would set them up to handle their finances well as they transition.
As parents of this generation of kids, I find that we are somewhat out of touch regarding how they handle financial transactions. I can't offer any advice regarding BOA or PNC. We had our kids set up accounts at our local bank when they were teens, but the bank is regional so they could physically walk into it, if needed, in the cities where they are now living. They have savings and checking accounts with a debit card. None of them has ever written a check, and one of them didn't even want to have checks on hand just in case he might need to use it. When transferring money among friends (or family), they use Venmo. Maybe you could Venmo them the monthly stipend? There are fees, I believe.

I think Discover offers some credit cards for students/college-aged kids who want to establish credit. That's where we told our kids to check.
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by humblecoder »

If you want them to be self sufficient, let them research what the best credit card and best bank account is for themselves. Maybe they will make a suboptimal choice (or at least suboptimal in your opinion), but that's part of the self sufficiency process. You make mistakes and learn from them.

Besides, if they make the "wrong" choice in this case, it's not like it is a make-or-break decision. So what if they pick Discover when you'd rather see them pick BoA? Big deal!
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ClassOf2021
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by ClassOf2021 »

Thanks for the replies and feedback. Some responses:

By big 4 I did mean accounting firms although their work goes beyond accounting

Thanks for the fidelity CMA suggestion…I have their card and brokerage/iras but not cma.

Related, I have used the fidelity card as our main credit card for maybe 20 years. While good it does get locked for security concern periodically (about once every year or two) and it is important for us to have a backup. For the kids I want them to have a backup of their own.

I too am behind the times in terms of banking, but I recently have had to work with the “kids” to understand how to use checks (one of their landlords who must be around 80 only takes checks).
humblecoder
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by humblecoder »

Also, young people today look at finances through a completely different lens than us "old folks". I came of age in a world where you had to have an account at a physical branch, get a checkbook, and an ATM card for accessing cash. And you always need to carry around cash.

Young people today can manage everything from their phone. You don't need a physical branch. You don't need a checkbook. All payments and money transfers can be done through Zelle, Venmo, etc for free. My son doesn't have a checkbook, and it is possible he will never need to write a physical check in his life! So let them decide for themselves how they want to manage their finances. The traditional choices you and others might want to foist upon them may not work for them in this new world.
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Harry Livermore
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by Harry Livermore »

humblecoder wrote: Sun Nov 28, 2021 8:12 am Also, young people today look at finances through a completely different lens than us "old folks". I came of age in a world where you had to have an account at a physical branch, get a checkbook, and an ATM card for accessing cash. And you always need to carry around cash.

Young people today can manage everything from their phone. You don't need a physical branch. You don't need a checkbook. All payments and money transfers can be done through Zelle, Venmo, etc for free. My son doesn't have a checkbook, and it is possible he will never need to write a physical check in his life! So let them decide for themselves how they want to manage their finances. The traditional choices you and others might want to foist upon them may not work for them in this new world.
Excellent points.
I have Venmo and Zelle profiles, and Paypal (for a long time) and use them if someone requests it as a method. But it's not a go-to. Younger people seem fascinated by any novel and slick way of performing a basic transaction, with cash looking old-fashioned, and checks as downright anachronistic.
I'm in the middle where I use my AMEX for everything I can (I also have 2 business accounts) to gather the "points", but I also use a fair amount of cash, and of course have alternate credit cards if there is an issue with AMEX (tech issue, or merchant does not accept it) But I still love paper checks. I like paying bills with them, I like receiving them from clients. I like the paper trail. I wish they still returned canceled checks. So I get it; I'm old fashioned. I sometimes think it's akin to me in the line at the grocery store "under 10 items" line, credit card already in hand, ready for a 7-second transaction, but 2 people ahead is a nice old lady counting out exact change...
I'm not saying we need to know where every single dime goes, but it seems like many of my youngest colleagues, who never keep or reconcile a checkbook, use Venmo or Apple Pay for everything, seem to also be the ones who "have no idea where it all goes", despite all of the electronic methods of payment offering excellent record keeping and aggregation of data.
I think the simple act of being deliberate, by writing checks, sitting at the desk with like 15 paper bills, makes me go slow and consider how I'm spending my money. Many young people almost seem put off by the idea of spending a few minutes ruminating about income and expenses, unless it's a shiny app on the phone.
Also, kids are different.
My older two kids (son 22, daughter 19) have credit cards; but my son, after getting one on his own, did not use it once during his first semester at school, and the account was closed because of inactivity. Wife put him as an "additional" cardholder on her account after that. That remains his one and only credit card for the moment. Daughter is more active; she charges on her credit card, pays it on the bank's web portal (card and checking/ savings are the same big bank) In my view, she is more advanced and more interested in finances.
They have both had checking accounts since they were 16; as far as I know, neither has ever written a check. They have had savings accounts since birth. The older two, with incomes, contribute to Roth IRAs. My older son has a VG taxable account. So the older two "adult", somewhat, earning, saving, spending, investing. They also have various Venmo-type accounts. But daughter seems to use them; son does not. Different.
I think it's still some nebulous concept for them. Maybe their brains aren't ready? We seem to have extended adolescence to like age 25-27 in the US. And these are sheltered, upper middle class kids.
For a guy (me) who used to tuck into Friday night pizza while watching Wall $treet Week with his dad, it seems curious to me that my own kids (who have heard me babble on endlessly about personal finance) seem to have little interest in it.
OP. I'm sorry if none of my anecdote is useful to you... I really just want to confirm what humblecoder pointed out; that many young people view money, income, investing, debt, spending, saving, all in a very different light than older people. I think you might give them a little leash, as I have done with my older two, and see how each proceeds.
Cheers
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by mtnlover »

I’m sorry if this sounds harsh, but in my view it is long past time for your b-school offspring to start being responsible for their own finances. We started our own when they entered college. Got them their own atm and low-limit credit card the day we dropped them off freshman year. For emergencies we backstopped them with our credit cards, but they had to get our permission prior to using them. Seldom needed, if ever.

One of them got into a bit of credit card trouble early on, but got a job and paid it off. We never heard details and have never had either of them ask us for a bailout. We covered all tuition and fees and they were responsible to earn their frivolous $$.

Im sure their b-school/accountancy education has been wonderful, but it’s time for life lessons for the real world.

Again, don’t mean to be harsh, but time for them to be independent.
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by Sandtrap »

andypanda wrote: Sun Nov 28, 2021 7:19 am My suggestion:

Tell them to each open a checking account at BoA and get a credit card too. Then you can easily deposit a set monthly amount in the checking accounts and they can pay their credit card bill. Once they get the hang of it after a month or two they can use their paychecks.

If they each get a second card for backup, why do they need yours?

Does Big 4 refer to accounting firms? Just curious.
Great suggestions.

We cut everything at some point. (Age 18) All the kids had their own accounts and very first credit cards as well as paying own cell phones, car insurance, etc.

That first jump off the edge of the nest is filled with both apprehension and joy for fledgling and parents.
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livesoft
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by livesoft »

We let our children (now in their late twenties) figure this out for themselves. First, they never had credit cards from us. Second, when they were still in high school they each had one of those free "teenager accounts joint with parent" checking account with our bank.

We only had to make the occasional comment about "Why did you spend $55 at the CBD shop?" before they just figured out that they could get their own accounts where the prying eyes of a parent could not see what they were spending their money on. It was trivial for them to get their own credit cards, too.

In other words, the young adults transitioned themselves to the Adult World without help from their parents.

Eventually though, one of them put our phones on her cell phone plan and pays that bill, so we don't have to mess with it. So turnabout is fair play.
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by RetiredAL »

When my kids turned 18, I took each of them them to the bank and we opened joint checking and credit card accounts. Over time, they got other cards and accounts without my help, other than they got to initially piggy-back onto my Credit Score. Being joint, I could "oversee" what was happening. Certain expenses, like schooling, I paid for or refunded to their account. Yeah, the Bank of Dad had to occasionally guide them. Overall they quickly learned how to manage their in and out flow including planning/saving for future expenses.
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by Sandtrap »

livesoft wrote: Sun Nov 28, 2021 10:06 am We let our children (now in their late twenties) figure this out for themselves. First, they never had credit cards from us. Second, when they were still in high school they each had one of those free "teenager accounts joint with parent" checking account with our bank.

We only had to make the occasional comment about "Why did you spend $55 at the CBD shop?" before they just figured out that they could get their own accounts where the prying eyes of a parent could not see what they were spending their money on. It was trivial for them to get their own credit cards, too.

In other words, the young adults transitioned themselves to the Adult World without help from their parents.

Eventually though, one of them put our phones on her cell phone plan and pays that bill, so we don't have to mess with it. So turnabout is fair play.
Great points
Couldn’t have said it better.

Great job!!!!!!
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Wannaretireearly
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by Wannaretireearly »

We recently opened BofA accounts for our 11 and 13 year old.
We get to control the accounts and I like it’s all tied to my login.
Kids like to trade cash for virtual $ at BofA. I think this is helping build some savings habits. All good.

Now, I have a chunk I promised dear son, I would invest in his behalf. He saved X, I’ll invest X for him. I want them to learn the investment benefits, long term, early. This could backfire.

Has anyone tied BofA kids accounts to an investment account? I’m trying to figure the easiest way to do this, where I don’t have to create new logins, and importantly, be able to show my son where is $ are altogether. Thoughts??
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by Gadget »

My only comment is that BOA is terrible for new people starting out. Everyone who is rich and financially stable on bogleheads loves BOA for the Platinum Honors credit card reward perks, which waives all the outrageous BOA fees. When in school, BOA also waives all fees to get young people hooked. But when starting out in your career, BOA hits you with all sorts of crazy fees and should be avoided.

I had BOA in college because it was convenient and had no fees. As a poor young adult, they were awful and I dropped them from everything and went with a credit union. Now that I'm financially well off enough to qualify for Platinum Honors and the awesome credit card perks, I'm back with them. But I still despise BOA to this day, and wouldn't recommend them for anyone who can't qualify for Platinum Honors.
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by Makefile »

grandmacassie wrote: Sun Nov 28, 2021 9:36 am I’m sorry if this sounds harsh, but in my view it is long past time for your b-school offspring to start being responsible for their own finances. We started our own when they entered college. Got them their own atm and low-limit credit card the day we dropped them off freshman year. For emergencies we backstopped them with our credit cards, but they had to get our permission prior to using them. Seldom needed, if ever.
Yeah, I didn't want to be overly harsh either. I suspect bogleheads.org is overrepresented with those who went and opened own bank accounts and credit cards (the CARD Act might be part of the issue here) at 18, and who would have found being in the situation described by the OP embarrassing. I know I would have.

Why can't they go on somewhere like bankrate.com and figure out which credit card might be best on their own? They could look at the various rewards programs and figure out which might be most advantageous for their level and type of spending.
Gadget wrote: Sun Nov 28, 2021 11:39 am I had BOA in college because it was convenient and had no fees. As a poor young adult, they were awful and I dropped them from everything and went with a credit union. Now that I'm financially well off enough to qualify for Platinum Honors and the awesome credit card perks, I'm back with them. But I still despise BOA to this day, and wouldn't recommend them for anyone who can't qualify for Platinum Honors.
Heh, yes. Capital One turned me down for a credit card at 18 (again before the CARD Act when this was still viable) and I still hold a grudge.
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by lazynovice »

My son had good luck with Capital One Quicksilver which he applied for after his internship and once ha had accepted his full time offer. Another poster here last week thought Capital One Savor reward structure made more sense for their 20 somethings.

He was an authorized user on my Quicksilver account during college. They have those cards still as back-ups but doesn’t use it.
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Re: Transitioning kids from dependent to self sufficient: bank and credit accounts

Post by LuckyInLife »

My two children are currently senior and sophomore in college. They both applied for and received their own Discover credit cards before their freshman year. This year they are both in apartments with no meal plans. I deposit enough for rent, utilities and an amount for meals, entertainment, etc just before the first of every month. They are then responsible for budgeting themselves for everything. I helped my son, the sophomore, get auto pay set up for his rent, utilities and credit cards. The senior did all that for herself. She also has a big accounting job lined up (Los Angeles) when she graduates. We will help her get a new apartment set up, but otherwise she will be living on her paycheck. She is very proud of her 800 credit score. They both bank with Chase because they can take advantage of my Private Client relationship.
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