While there’s been a larger push for financial literacy in schools as of late, teaching money management basics has yet to make its way to the school curriculum. If you’re a parent, that means the responsibility falls on you to teach your kids money lessons, perhaps through using a handy app or game.
Another way to educate your children about finances is to give your child a debit card. With prepaid debit cards designed for kids offered by Greenlight and FamZoo, as well as a handful of credit card networks, you can get a card for your kid of any age.
But how can you tell if it’s a good idea? Let’s look at the pros and cons, and how to determine whether a debit card is right for your kid:
Know the Pros
First, your kids will have a better understanding of dealing with money digitally. Studies point toward the fact that we’re prone to spending more online. And while we do shell out fewer bucks using cash, using cards and making transactions via money-sharing apps will surely be a big part of your kids’ lives when they become adults.
“Kids need to understand that digital money is just like real money,” says John Lanza, author and creator of The Money Mammals. When his daughter turned 10, he and his wife bumped up her allowance to $100 a month. While she had a larger budget, there were also more responsibilities: She had to pay for her cell phone, food at school and clothes. Having a debit card helped her be more in control of her money.
Other advantages of giving your kids a debit card are:
- Safer than cash. Safer to use a debit card than have them carry around cash, which they could potentially lose, points out Road2College founder Debbie Schwartz, who gave her three kids debit cards when they were teens.
- Easier to access money. Paying with a debit card enables your kids to get a hold of the money they have earned and saved, says Schwartz. “Plus, reviewing their online statements gave them practice into managing their money, reviewing transactions and budgeting.”
- Lessons in safely managing money. You know not to flash your wad of cash around after you make withdrawals from an ATM, but your kids might not know otherwise.
Your kids can learn to find safe ATM locations, keep an eye out for suspicious activity when they make withdrawals, and save their receipts.
“You’d be surprised how naively teens go to ATM machines, don’t look at their surroundings, don’t pay attention to if someone is watching them enter their PIN and then casually take the cash and don’t safely put it away,” says Schwartz. “It may seem basic to adults, but teens just don’t think of these details.”
Convenience. It’s much easier to fork over money online, says Lanza. While your kids are more prone to spending money digitally — aren’t we all? — the convenience outweighs the cons. Plus, you’re teaching your kids how to handle money responsibly.
Understand the Downsides
Before making your decision, you’ll also want to weigh the cons of giving your kid a debit card:
- Limited fraud protection. If your child’s debit card were stolen or suffered an instance of fraud, it wouldn’t offer the same protection as a credit card.
- Kids might be prone to spending more. You’ll want to watch for your kids spending more and in a shorter amount of time. If that’s the case, you might want to consider transferring smaller amounts of money in shorter time periods. For instance, instead of transferring allowance to your kids’ debit cards once a month, consider doing it every week.
- More cards to manage. More cards, more things to consider. If you’re handing your kid cash, you’ll most likely have fewer factors to consider: Which parental controls on the debit card to enable, how frequently you want to transfer money, and how closely you want to track your kids’ spending.
Instill Basic Money Management First
You’ll probably want to teach your kid the basics of saving and spending before signing them up for a debit card. Before they decided to give their daughter a debit card, the Lanzas had implemented a three-jar system with her money. She was to save, spend, or share her money. “The three-jar system was about putting physical money into jars, and the debit card was the digital version of that,” says Lanza.
If your kid has some know-how before you make the switch from physical to virtual money, it’ll be less befuddling, and your young one will probably make fewer blunders.
Figure Out Your Parameters
If you are leaning toward giving your child a debit card, figure out the age at which this might be most appropriate. If your child has an entrepreneurial streak and is already earning money on their own, or you are handing them more financial responsibilities, it might be time to introduce a debit card into their lives.
Some prepaid debit cards have no age minimum, while others are only offered for those in a particular age range. So that might affect which debit card you spring for. When shopping around for cards, check to see what the parental controls are. Many allow you to pause spending on your kids’ cards as necessary, allocate money to chores and tasks, and to track transactions.
Look Into the Fees
Of course, just like any card, you’ll want to know the fees. Some prepaid cards offer a monthly fee to use the card and access the online platform. You’ll also want to read the fine print and see if there are fees for ATM withdrawals, PIN transactions, and balance inquiries.
Getting your kid started with using a debit card can be a good idea, but you’ll want to understand the benefits along with the downsides. Plus, preparing your child to spend cash virtually will make for a less bumpy transition.
“The reality is that most transactions are not done with cash, and having my kids use a debit card was one of their first of many lessons for how to manage money in a cashless society,” says Schwartz. “You’ll be having a lifelong conversation about money with your kids,” adds Lanza. “Starting a teenager with a card means they’ll be making mistakes when the stakes are lower.”