Hardly anyone does anything on paper anymore. Shopping lists are transcribed into our phones, emails and texts have replaced letters, and homework is increasingly completed online. While notepads are still bought and diaries are still written in, it’s obvious that we’re getting closer and closer to abandoning physical paper, and money is no different. In fact, one in ten Americans rely entirely on digital payments.
This puts parents in a strange situation. When should your child have access to a debit card? Having a debit card opens up a world of options, like mobile payment or creating a Paypal account. When shopping is constantly done online now, you kid might not always want something from the store, and if you want them to use their own money, the easiest way is for them to have their own card. Also, it establishes good financial habits and allows your child to begin financial planning.
However, every kid is not ready for this responsibility. The limitations with cash can be helpful when teaching financial responsibility. Not only is an expendable resource, so that once you run out, you’re out, but it’s harder to part with cash than it is to swipe a card. However, the days of asking whether kiosks or farmer’s markets accept cards are over. Now, it’s a question of whether they’ll have change for anyone handling cash. If you’re starting to wonder if it’s time for your kid to have their own debit card, here’s how to know for sure:
Do they lose things easily?
Examine your child’s behavior with other valuables. While cash might be “easier” to lose, in that your child my jam crumpled bills into their pocket before throwing their jeans in the wash, it’s also less impactful if your child misplaces a couple bills. A debit card has access to their entire checking account. And while current EMV cards are much safer than their predecessors, you want to make sure that your child can be trusted not to lose it.
Do they frequently lose other important items? Can they not find their homework or house key among their catastrophe of a bedroom? Or are they generally reliable? This is a decision you’ll have to make based on observation, but it should be easy to tell whether they can handle the responsibility.
Do they understand the implications?
In order to have a debit card, there is a lot of necessary terminology that your child should know. While they are free to ask questions to clarify, they should already have a decent grasp of some banking concepts if they own a debit card. They should know what compound interest is, the difference between a savings and checking account, or whether they should bank at a traditional bank or credit union. They need to understand the terms before they can manage.
They also need to understand the value of a dollar. While this might sound obvious, for many teens this is an elusive concept. Kids who have worked a steady job before, whether that was dishwashing or mowing lawns, will have a better grasp of what money really means than those who have only survived off their parents’ good will and allowances. Pay attention to your child’s spending habits; are they a saver or a spender? If they fulfill their every whim, it might not be prudent to allow them access to their entire checking account at once. However, if they weigh every purchase responsibly, then there is little risk.
Additionally, they need to understand who to give their information to online and who to avoid. While they’re probably okay with Amazon or iTunes, any email asking for their debit card information is a red flag. Make sure that they are computer savvy enough to know who is legitimately selling them a product and who is trying to scam them.
Do they have a good example to follow?
This might be an uncomfortable point, but look at your own financial habits before you rush off to give your kid a debit card. This is important. If your child is ever in a situation that they don’t completely understand, then they will probably defer to what they have seen you do in the past. If they have seen you incur overdraft fees to “get by” that month, they might think that sort of behavior is acceptable.
Setting a good example is important not only for building their habits now, but for setting them up for later. You’ll likely have to co-sign on their first loan, whether that’s for school or a car. It’s in both your interests that your kid has a solid financial base to fall back on.
So many elements of their future will stem back to whether or not they were taught the right habits. If you start too late, they might not be confident in their financial skills, but starting too late can be equally disastrous. There are some “baby-steps” like prepaid cards and special “teen” checking accounts at your bank; be sure to take advantage of those if you’re just not sure. Having a debit card is a significant responsibility, but it is excellent preparation for adulthood. Money management is an essential skill. This is just the first step on that journey.