Does Your Teen Need a Debit Card?

It is never too early to start teaching the fundamentals of money management and money-saving techniques to your kid. Way to do this is through hands-on experience of debit card usage. But, how old the kid should be to get a debit card?

What is a Debit Card?

The debit card seems similar to a credit card. But actually, it works differently from a credit card. A credit card allows you to borrow the amount against a credit line. The balance of credit card is debt that you have to pay back, and your card activity affects your credit history.

On the other hand, debit cards are directly linked to your checking account. When you use your debit card, you pay with the amount that you already have in your bank account. In case you spend more money than what is in your bank account, the bank charges you an overdraft fee.

Debit Card Benefits

Here are some benefits of using a debit card:

  • Make Purchases

This is the main reason to carry a debit card along with you. With a debit card, you can directly spend the money from your checking account without having to write a check or pull out the cash. You can use debit cards at any place where credit cards are accepted, including online and stores.

  • Digital Wallet Benefits

If you don’t want to carry a physical wallet with you, and want to add the security of the smartphone’s technology, consider creating a digital wallet. Link your debit card with your digital wallet and pay for your purchases through your phone. 

  • Keep a Check on Your Account Activity

These days, you may worry about potential fraud while managing your finances. As a debit cardholder, you can set up real-time alerts for specific transactions, like transactions over a specific amount. These alerts help you catch the frauds, in case information of your debit card falls into the wrong hands.

  • Get cash

If you require cash, you can easily withdraw from your checking account by using a debit card at the ATM. You can also pay with your debit cards at stores, such as pharmacies or grocery stores, and ask for cash.

Why Give Debit Cards to Kids?

Giving a debit card to the child helps them develop great financial habits and teach them effective ways to save money. A debit card can be a good option for teaching the budget to a child properly. With a debit card, your kid can easily explore the basics of:

  • Tracking their expenses with text alerts, online tools, and banking apps
  • Creating an effective monthly spending plan using their earnings and allowances
  • Learning safe debit card payments using their phone
  • Difference between wants and needs

A debit card provides a tangible method to understand the connection between the value of money, expenditure, and goods or services received. With a debit card, you can also teach your kidabouttheimportance of safe investments.

What are the Options for Debit Cards for Kids?

Parents have 2 options to provide access to a debit card to their child:

  1. Help them open a checking account
  2. Giving a prepaid debit card

Depending upon the state and institution rules, credit unions, financial institutions, and some banks provide checking and saving accounts for teens and children. The account may be owned jointly by the child and the parent or guardian, only owned by the child, or requires the parent or guardian to act as the custodian.

The kids up to 12 years are restricted to savings accounts with ATM cards only. For teens between 13 to 17 years, teen checking accounts generally offer debit cards allowing the kids to make online purchases. Teens can use debit cards to buy things from a store, and the money is deducted from their checking account.

A prepaid debit card works similar to a traditional debit card. Kids or teens can use the card to pay for things. However, these cards are not directly linked to a bank account. The money is added to the debit card to spend. When the balance of the card reaches zero, no new transactions are allowed unless you add more money to it.

What Age to Give a Debit Card to Kids?

Providing a debit card to a child is completely a personal decision. The final decision may come down to the judgment of parents and the maturity level of the child. The good time to give a debit card to a child is around 12 years. This is the perfect age to start practicing with the debit card and access to a small amount of money.

With a debit card at this age, you can prepare your child for the best investments for future expenses, like college, school, and adulthood. A prepaid debit card can be a good option during this age if your child is not sufficiently old for a teen checking account. After they reach the appropriate age, you can upgrade their account to teen checking. And, at the teenage, they can earn money through a side hustle and part-time job.

Benefits of Giving a Debit Card to Kid

  • It will teach them financial responsibility

Teaching your child financial responsibility at an early age will help them learn financial planning as they grow. They need to understand the difference between needs and wants at an early age. Make them understand the value of saving. With a debit card, you can also teach them how to save their money and where to keep their savings.

Explain to the child how to use the debit card. Tell them about the importance of keeping the password secret.

  • Debit Card will allow them to travel abroad without the need to exchange money

Nowadays, children have many opportunities to travel like a field trip, international conference with classmates, etc. You don’t have to worry about giving a traveler’s check or cash to the child for his international trip. With a debit card, you will not have to worry about the child being robbed while traveling abroad. They can just use their debit card to purchase what they need.

  • You can set a spending limit

You can put a certain amount of money each month in your child’s debit card as a monthly allowance. A limited amount of money to spend will teach your child how to value the money and how to spend it responsibly. This will teach them to budget their spending.

Every kid has its own pace to become financially responsible. Some become responsible at a very early age, while others won’t be ready until high school. Let them gain experience by making mistakes of their own. They will learn from their mistakes. It is important as a parent that you monitor them how they use their debit card and seek out teachable moments.

Remember, you are giving them a debit card to make them responsible with their spending, and let them manage their finances on their own. Give them a debit card when you think they are capable of and help them learn how to use it. Do not give them access to more money than they are comfortable with.

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