When to Give Your Kids a Debit Card

More than one-third of college students say managing a bank account is a major cause of stress. Also, 12% say they never check their bank account balance because it makes them too nervous.

Perhaps giving young people a debit card at a younger age will take some of the financial fear out of their eyes.

Debit cards are the 21st century upgrade to checkbooks. They work faster and provide better record keeping. You use them to pay for products or services, the money gets deducted electronically from your checking account, and you don’t have to write anything down.

The question for today’s parents is: When is the right time to arm a kid with that loaded gun that is a debit card? The answer is this: When they can properly aim and not shoot themselves in the foot, obviously. However, it’s not so obvious when that particular moment will arrive.

Teach Your Kids About Money Early

Financial literacy preparation should start early — before your kids can even spell m-o-n-e-y. Teach them the difference between needs and wants. When they put money in their piggy banks, stress the 10-10-80 rule: give 10% to charity, put 10% in savings, and use the remaining 80% as needs and wants allow.

When kids get that curious look as you swipe your debit card, let them do it. Explain the process and why they should never blurt out, “My mommy’s password is Fabio!”

That’s not something anyone over 30 had to learn while growing up. Banking is now largely done digitally. An actual check might as well be a Dead Sea Scroll to a high schooler whose entire life functions through the apps on their smartphone.

With banking, all that technology still comes down to basic math. Lesson number one: You need enough money in the bank to pay for the things you want to buy. The more you have, the more you can buy.

And the more you can buy, the happier you are!

(Actually, skip that part of the lesson. Go with the old “money can’t buy happiness” mantra and hope the kid goes for it.)

Debit Cards vs. Prepaid Cards

Some parents give their children prepaid cards instead of debit cards. Prepaid cards are not tied to a bank account, though they can function in a similar way. As an alternative to traditional banking, prepaid cards have higher fees and will not teach your child how to manage a checking account, which is an important life skill.

Additionally, a checking account can be linked to a savings account. Look for one designed for children and teenagers that has no fees.

Open a Joint Account with Your Child

A good first step in that voyage of discovery is to open a joint account. Many banks offer such accounts, where the kids control the money but the parents can monitor the activity. Managing a bank account provides hands-on financial literacy education for kids.

Don’t wait until your baby is 16 to open a joint account. By that age, they’ll be piercing their tongues just to upset you. Start an account when they’re still young enough to see your monitoring as loving parental guidance, not as Meddling Mom or Dorky Dad butting in.

Joint accounts offer limits on ATM withdrawals and other transactions. One feature to avoid is overdraft protection.

That means a purchase will be approved (for a fee) even if there isn’t enough money to cover it. Kids should learn the importance of living within their means and that there is a penalty to pay, if they don’t.

If that leads to friends laughing at them when their attempt to buy a movie ticket is aborted by “insufficient funds,” that’s all right. The embarrassment might keep them from turning into a credit card junkie in desperate need of a debt management program later in life.

It is vital to teach kids about credit cards, of course, but that’s a different conversation from debit cards. And if you’re worried that misuse of a debit card will affect your kid’s credit score, don’t.

Credit bureaus don’t factor in debit cards because the cards don’t utilize borrowed money. If you want to establish a credit score for your children, you can make them an authorized user on your credit card.

But again, that’s a different part of the overall conversation on kids and money. As much as technology has revolutionized banking, human evolution hasn’t changed.

Some kids will be ready to handle money when they’re eight or nine years old; others will need a few more years. It’s up to the parent gauge when their offspring is responsible enough to use a debit card.

That big day will only arrive, however, after many days of preparation. So try to teach your children well. The last thing you want is for them to go off to college and be scared of their own bank accounts.