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Banking Safety Project for Teens
by Barbara Frank

Teens usually learn more from real life learning projects than from projects out of books. A bonus is that the teen doing the assignment sometimes also helps out the family by performing a useful service.

Here’s a project you can assign your teen that will be helpful to you. Maybe you haven’t noticed, but for the past year or so, at the end of each week the FDIC closes one or more U.S. banks. These closings aren’t widely publicized, but they’re happening. No one wants to find out their bank is one of the failed banks, especially once it’s too late to do anything about it.

Sometimes the banks are merged with other banks and the transition is seamless. But if that doesn’t happen, the bank is closed by the FDIC and you may have to wait to get your money back. The FDIC insurance fund is slowly being used up (although the more cynical among us figure the government will just print up a fresh batch of dollars once they run out.) The bottom line is that no one wants their money in a failed bank.

Fortunately, there are free online services that allow you to look up your bank and make sure it’s not headed for a Friday night closing. These services study the financial situation of each bank and rate it based on performance and prognosis. We’ve been watching our banks for a few years, and actually dumped a couple when their ratings went down. One went from 4 stars (pretty good) to 1 star (poor) in less than two years. In this economic climate, it makes sense to protect your hard-earned dollars by keeping track of your bank’s safety rating.

Your teen can look up the family bank to see what kind of shape it’s in. Some free services come with reports that explain exactly what’s going on in a bank, and where problems may be looming. Most teens won’t want to read these reports, preferring just to look at the wrap-up. Those who do want to read the particulars may be candidates for careers in accounting or investment banking. In either case, reading the reports and looking up unfamiliar phrases would be a good learning exercise for teens and parents.

The two services we use are Bankrate.com and Bauer. Bankrate offers free reports, while Bauer offers a brief wrap-up for free; detailed reports will cost you. But all you really need is the wrap-up.

Since many banks are in trouble because they made too many imprudent loans, your teen should also take a look at your bank’s troubled asset ratio. The Investigative Reporting Workshop (American University School of Communication) offers a handy tool that lets you look up any bank and see its current troubled asset ratio, how it compares to the national median, and its ratio history for the past two years.

Using these three tools will help your teen understand a bit more about banks while helping you decide whether your money is safe in your current bank. Your teen can look up this information for Grandma and Grandpa to make sure their banks are good ones, too.

Bankrate: http://www.bankrate.com/rates/safe-sound/bank-ratings-search.aspx

 Bauer: http://www.bauerfinancial.com/btc_ratings.asp

 IRW Banktracker: http://banktracker.investigativereportingworkshop.org/banks/

 Copyright 2010 Barbara Frank/ Cardamom Publishers

Barbara Frank homeschooled three children to adulthood and continues to homeschool her youngest son. She’s the author of “Life Prep for Homeschooled Teenagers, “The Imperfect Homeschooler’s Guide to Homeschooling,” and “Homeschooling Your Teenagers,” as well as two upcoming books.  You'll find her on the Web at www.cardamompublishers.com and http://barbarafrankonline.com