Teaching Financial Literacy To Teens: Account Reconciliation

Your teen may have a number of accounts that require monthly reconciliation: an accounting process that is used to make sure the money leaving an account matches the amount spent. If your teen has any account from which he or she can either withdraw money or pay for purchases, he or she needs to reconcile the account every month, to make sure there are no errors. Let's take a checking account for example:
 
Your teen should be entering every deposit and every withdrawal (in this case, each check), in his or her check register (the log that accompanies the checkbook). Every month, your teen's bank sends a statement (either by mail or via email; whichever you and your child have chosen). The statement is the bank's record of all transactions for the month: the deposits that have been made and the checks your teen has written. The statements also include either the actual checks that your teen wrote (and that the recipient has either cashed or deposited), or a digital copy of all the checks. To reconcile the account, have your teen sit down with both his or her checkbook and the checking account statement. Then have your teen:

• Make a checkmark in the appropriate box in the check register to show which checks and deposits appear on this month's statement;
• Record any transactions that appear in the statement but that have not been entered in the check register yet (such as bank fees);
• Use the reconciliation form that is on the back of the bank's statement (or included with email statements). Here, your child should enter the ending balance that is shown on the statement; add the total amount of deposits that were made after the ending date (these are deposits outstanding); subtract the total of any checks that have not been returned (the checks your teen has written but that don't appear on the statement).
• The ending balance that appears in your child's check register should be equal to:

Bank account statement ending balance

Plus deposits outstanding

Minus checks outstanding

• If there is a discrepancy, help your child review entries and math until the error is found. When in doubt, contact the bank for help. 

Credit card statements should also be reconciled. Though we would like to trust our credit card company to be error-free, mistakes do happen. Teach your child to keep all of his or her receipts in a specific place (such as a large envelope or zippered pouch). When their credit card statement arrives, help him or her check each transaction against his or her receipts, and make sure the previous month's payment is correct. Again, if you have any questions, contact the company for answers. While the credit card statement is out, make sure you point out the section that lists how long it would take to pay off the balance - and at what cost - if only the minimum payment were made each month. This can continue to encourage your child to spend only what he or she can pay off each month.