You may be worried that if you give your children a debit card they may drain your bank account. Rest assured there are products designed to specifically prevent this from happening. The bigger questions are:
- Is your child responsible enough to carry and use a debit card?
- Do you have time to make the debit card a financial management learning experience for your child?
- Is it more convenient for you to give your child a debit card rather than cash for approved expenses or allowance?
At What Age?
I can’t count the number of times I have removed my children’s $1, $5, $10 and $20 bills from the washing machine and dryer. Whether it was money for school expenses or their allowance, it was still any indication they either needed more instruction on money management or were simply too careless to be given a debit card. I won’t mention the number of times they lost their wallets! Eventually, however, between ages 11 and 12 they found the wherewithal to become organized and seemingly responsible enough to receive a debit card. And, their expenses for sports and school activities were becoming more frequent requiring me to keep a lot of cash on hand. I was ready to try the debit card approach to money management!
Which Debit Card?
But, which debit card? Fortunately, now there are several debit card options available. You may have heard of a couple specifically designed for pre-teens and teenagers: Greenlight and FamZoo. They integrate allowance with chores and notify you in real time of your child’s expenditures. A reporting system makes it easy for you to review expenditures with your child. One system even includes a budgeting process. Of course, you may not have the time it takes to setup and maintain these types of systems which cost around $5.00 per month.
Another alternative is a bank debit card. Bank of America, for example, will provide any child under the age of 24 with a fee free bare bones checking account and debit card. You the parent could be a signer on the account and receive immediate notifications of expenditures over a set spending limit. As the account funder, you would be able to control the maximum amount spent and set up automatic recurring transfers to fund the account, for allowance or upcoming expenses.
Please see the page titled “Saving Matters” in this blog for information on the American Express and Chase Bank PREPAID debit card options.
Wells Fargo Bank also has a checking account and debit card for teens ages 13-17. A minimum of $25 is required to open the account (parent must be present with proper identification) but there are no monthly account fees!
Debit Card Benefits For Teens And Parents
Benefits for teens include the ability to:
- Manage their accounts with 24/7 online access.
- Get account alerts via text message, email, or online.
- Develop budgeting skills with free money management tools like My Spending Report and Budget Watch.
- Check balances and account activity from a mobile phone
Benefits for parents include:
- Online access and account alerts which let parents review their teen’s account activity anytime.
- Online transfers which allow parents to easily move money from their account to their teen’s account.
- Optional Overdraft Protection from a Wells Fargo savings account can help protect against unexpected overdrafts and returned items.
Check with your local bank or credit union to see if they too offer a similar teen account. One advantage of your child having their own account is that when they lose their debit card, you won’t have to cancel YOUR account.
A Credit Card Too?
No discussion of debit should end without a mention of credit. The ability to conduct most financial transactions is closely related to our credit rating. Your child has no credit rating but may soon need one for college or vocational school—to get a loan, rent an apartment or maybe buy a ‘beater car’ to get around. If your child can’t qualify for these types of items alone, you will be asked to bear the financial risk yourself! But, there is a risk free way to help your child establish credit. If you have good credit yourself, you can get a credit card for your child on your account. I am not suggesting you give them a credit card but merely add them to your account. You can take them out a few times a year and use their card to pay the bill. Paying the credit card invoice on time will maintain your good credit and establish a good credit score for your child who will need one when the cord is cut for good!
In summary, a debit card can be a good thing for you and your children if properly and easily managed. I would also opt for Overdraft Protection at least until your child exemplifies sound money management for a year i.e. no overdrafts. Any overdraft fees should be paid for by the child from allowance or work receipts.