Teaching Kids About Using Checks
Balancing a Checkbook
Now that your teenager knows how to write checks, she'd better make sure that she reviews her checking account each month. Each month the bank sends a statement showing all checking account activity. Some people simply rely on the bank statement to verify what's in their account. Believe it or not, however, banks make mistakes (and so can your child when she enters in the check ledger deposits she has made or checks she has written). Mistakes and overcharges to the account or other problems can be corrected if she balances the checkbook each month and brings the error to the bank's attention.
Bouncing a check means that there isn't enough money in the account to cover the amount of the check. Bouncing a check is costly (banks levy bank charges), can hurt your child's credit rating, and can even result in criminal charges if he knowingly writes a rubber check (one that will bounce).
Balancing a checkbook doesn't mean putting the checkbook on your head and try to keep it from falling off. Rather, it means reviewing all deposits and payments to make sure that they even out and that the bank (or you) didn't make any mistakes.
It's essential to keep track of how much she's spending, however, so that she doesn't bounce a check. To do this, she must not only be accurate when entering amounts in you're the check ledger, but she also must balance the account each month.
Balancing a checkbook isn't hard to do; it just sounds difficult. Follow these five easy steps (and the figure that follows) to find the correct bank balance.
- Have your teenager write down his closing balance. The closing balance can be found on the front of the bank statement.
- Add any deposits he's made that did not yet appear on his statement (because he made them after the closing date of the statement).
- Add the amounts he wrote down in steps 1 and 2.
- Total up all checks that he has written but that have not yet cleared (because they aren't shown on his statement as having been cashed by the party to whom he wrote the check).
- Subtract the amount in step 4 from the amount in step 3. This is your child's balance.
|Step 1: Closing balance||$__________|
|Step 2: Add unreported deposits||+__________|
|Step 3: Total of steps 1 and 2||$__________|
|Step 4: Add uncleared checks||__________|
|Step 5: Subtract step 4 from step 3 to find the balance||$__________|
If your child's numbers don't agree with the bank's numbers, he should double-check his figures. Make sure that he has subtracted any charges for ATM withdrawals or checking account fees, or that he has added any interest to which he's entitled. If, after double-checking the balance, he still think he's right, he should contact the bank and explain the discrepancy. If the bank is wrong, it will adjust the account. But don't expect adjustments if your child waits many months after the month in which the error arose. He should be sure to balance his checkbook each month to catch mistakes immediately.
More on: Money and Kids
Excerpted from The Complete Idiot's Guide to Money-Smart Kids © 1999 by Barbara Weltman. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.
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