What the Sigma Account Means to You as a Parent
- In order for your teen to open a Sigma Account, you need to have a Stanford FCU account that will act as overdraft protection, if your teen overdraws the account. With your guidance, that’s not likely to happen, but if an overdraft does occur, use it as a learning opportunity.
- The Sigma Account has lower daily withdrawal limits than other Stanford FCU Accounts. The daily limits (provided there are sufficient funds in the account) are:
- ATM – $200 per day
- Point of Sale transactions – $200 per day
- You will be a joint owner on the account, with access to the account to transfer funds, check the balance and more. Talk with your teen about your expectations and how you plan to monitor the account.
Please stress to your teen the importance of checking the account balance before making a purchase or an ATM withdrawal, as well as discussing the consequences of an overdraft.
About the Teens & Money Course
The Teens & Money Course is a FREE online class, which we recommend teens do before opening the Sigma Account. It provides the basic knowledge he or she needs before assuming the responsibility of his or her own checking account. Your teen will also receive other useful information on investing, buying a car and more.
Tips on Raising Money-Savvy Teens
Teaching teens to be responsible with money and to develop a sense of ownership over their money. will greatly benefit their life now and in the future. Raising money-savvy teens goes far beyond making sure they can balance a checkbook – although that’s an important lesson. Here are some tips to foster your teen’s financial knowledge:
- Relate money to life goals. Talk to your teen about his or her personal dreams to discover what he or she is passionate about. Then relate your teen’s aspirations to understanding money basics as a way to make life easier and to help them reach their goals sooner.
- Develop a savings plan and budget. Get your teen in a habit of saving money. Lack of savings is the biggest problem plaguing most Americans today. Help your teen avoid debt later in life by encouraging good saving habits now. There is a good budget worksheet available in the Teens & Money course.
- Teach teens about the power of compounding interest. It’s motivating to teens to know that if they invest just $100 per month they can hit the million dollar mark in their fifties. Showing them how compounding interest works will get them excited and it is a great way to help them think about the future.
- Be a free thinker and watch for misleading advertising. We know … it’s easier said than done. But work on teaching your teen to evaluate advertising by asking “what are they trying to convince me to do?”, “who are they targeting?” and “what is the goal of this ad?” Doing so will help your teen evaluate ads logically, rather than emotionally. Also talking about needs vs. wants is very helpful.
- Teach him/her how to build a good credit history. This includes understanding the basics of how credit-reporting agencies work and how to use credit cards as a tool to build positive credit scores. Teach your teen to pay their bills on time, keep debt low and introduce them to credit cards under your guidance.
- Show your teen how to track stocks online or using an app each day. You’ll be surprised how fast he or she picks up the basic concepts of the market. When your teen is ready, buy a few shares in a custodial account of the stocks he or she has been following at an online trading firm. Give your teen the password so he or she can follow the portfolio regularly and make suggestions on what to buy next and when to sell.
- Encourage work. All your lessons will really hit home when your teen starts earning his or her own money. According to a Roper study, people who worked in high school are more likely to achieve their financial goals and be more knowledgeable about money than those who did not. How can you encourage your kids to get a job? Give them money for the necessities and insist they earn the rest, or require they pay for their own car insurance and gas, if they expect to drive.
- Build a solid financial foundation. Make sure your teen has a checking account, savings account and even a Roth IRA — and knows how to manage those accounts.