Using cash is a smart first step in finances for kids because it helps teach them the value of a dollar. Acquiring a debit card is a bigger responsibility, but as kids get older, they’ll eventually need to make more frequent purchases. With more purchases comes a greater need for convenience and a desire to avoid carrying a lot of cash—this might be the time to explore if your child has reached the appropriate age for a debit card.
If you’re looking for a good middle ground between a cash allowance and an account of their own, consider giving your child access to a debit card tied to an account that you can access. You can monitor their spending, teach them valuable lessons, and extend greater levels of responsibility along the way.
How to talk to kids about money
Serious talks about finances can lead kids to feel uncomfortable or, worse, bored. Even if you’re not a money expert yourself, you can make this conversation easier by putting it in simple terms. As with any subject, money matters are simpler to understand when you can use examples.
Is there an item your kids have been asking for recently? If yes, sit down together and come up with a plan to save for the purchase. Teaching patience, as well as daily habits, can help your kids form a healthy relationship with money.
Check out some tips that we’ve collected for teaching kids financial literacy here.
How to determine if your kids are ready for a debit card
Every child is unique, and there’s no standard age for preparing your kids to carry a debit card. As a parent, you’ll have to gauge when your children are ready for this responsibility. Consider these signals to determine if your kids are ready:
They are beginning to understand the importance of saving
Knowing how to save for the future is an important life skill, but it’s one that many Americans lack—28% of U.S. adults have no savings at all.
It’s not uncommon for children to spend every dollar that comes into their hands. However, as they get older, they should learn how to save their money for future purchases. Does your child consistently save their allowance? That’s a good sign that they are beginning to compare the value of purchase options and that their financial understanding is growing.
Before giving your children access to a checking account, consider opening a youth savings account. Start by using this account for their allowance and birthday money—it’s an excellent introduction to banking and money management. A savings account teaches kids how to prioritize and plan for future expenses. Plus, they can start learning how they earn interest on their savings.
They’re responsible with their valuables
Does your child frequently misplace his or her belongings? If so, it may be too early for a card linked to a bank account.
Many parents allow their children to have a phone before giving access to a debit card. Not only is a phone useful for safety purposes, but it also offers kids the chance to demonstrate their responsibility and accountability. If your child can keep track of their phone and follows the guidelines you have set for data and overall usage, this may be a sign that they’re ready for a debit card.
They have proven their ability to handle cash
Children should understand that a debit card is the same as cash. You swipe the card to make a purchase, your balance changes, and money is sent to complete the purchase. Frequently checking an account balance can reinforce that a debit card is a convenient access to cash—you may consider showing your child how it works with the purchases that you make with your own debit card.
Before making the conceptual leap, children need to understand that a digital transaction is just as tangible as spending or receiving cash. You can see cash leave your hand. The same goes for checking your account balance.
Starting with a debit card before understanding the concept of cash can create a disconnect between purchases and balance. Using only cash for a year or two not only helps you control how much your kids spend but also reinforces the idea that money is a limited resource. Once they’ve proven they can handle cash, your kids may be ready to access a debit card.
They need to make purchases on their own
There comes a day when your kids can take a more hands-on role in making purchases at the store. You can even start by allowing them to be in charge of spending a few dollars for a treat. Creating a monetary connection between the purchases you make as a family to the things you bring home from the grocery store helps children understand the value of a dollar. When they’re ready, you can involve your kids in the purchase of their school supplies, clothes, and other larger purchases. An active role in making purchases will help give them a better idea of what things should cost and the value of looking for items on sale and creating a budget. When your child shows a strong understanding of money and value, they may be ready for a debit card.
As your kids become more independent and leave the house on their own, a debit card can provide a convenient way for them to spend money. For instance, if they’re headed out to the movies with their friends, a debit card can provide an easy way to purchase tickets. With a strong understanding of price and value, they will be in a better position to succeed with their new responsibility.
Setting the stage for building credit
Middle school-aged children may still be too young to be thinking about building a credit history, but it can be a good idea for some high-school students. Adding an older teen as an authorized user of your credit card or helping them manage a low-limit credit card can teach the responsibilities involved in borrowing and managing bills. You’ll still be responsible for paying the bill and helping them avoid any missteps. It may be scary to think of your child having access to a credit card, but with your help, you can put them in a position to responsibly managing finances and credit as an adult.
Moving from cash to a supervised debit card to a credit card gives kids time to learn about financial responsibility. By the time they’re ready to live on their own, your kids will have a solid foundation of financial knowledge—setting them on a path to achieve financial wellness.
Developing financial literacy early sets kids up for ongoing success in life. Start building the skills your children need to lead a financially healthy lifestyle.