A child typically has to wait till she turns 13 to get a regular debit card. However, research indicates that a typical child is ready to learn the money management skills required to handle a debit card by age 7. This article tells you when and why it might be (or not) a good idea to get your child a debit card. It also looks into the difference between debit cards tied to kids’ checking accounts and prepaid cards funded and managed by parents.
Although privacy advocates resist the idea. And some of us don’t want to stop using cash. There are signs that a cashless society is just around the corner. Whether or not the dream of a cashless society becomes true, it’s already a reality that checks are seldom used, and cash payments don’t work online, which is where we’re doing more and more of our shopping. Even some brick-and-mortar stores no longer take cash.
Whether we like it or not, it’s no longer possible for children to learn the habits they’ll need to manage money without some plastic. This being the case, how can you best introduce your child to plastic? Continue reading to find out.
When should you give your child a debit card?
A child can typically get a debit card at 13 when a parent or legal guardian opens a joint teen checking account on their behalf. However, according to University of Cambridge researchers, a typical child becomes capable of correctly understanding monetary transactions by age 7 (Source). Around this age could be a good time for your child to get a debit card or a prepaid card.
According to Dr. David Whitebread and Dr. Sue Bingham from Cambridge University, “By five to six years of age, children understand that some denominations do not carry enough value to buy some items. It is not until children approach seven years of age that they begin to understand money can be exchanged for goods and that ‘change’ is returned by the shopkeeper only when denominations larger than the cost of the item are offered by the purchaser,”
The benefits of a debit card vary depending on the age of the child
Reasons for giving your child a debit card will vary as your child gets older. Here’s a quick breakdown of the benefits you can expect depending on your child’s age.
Keep in mind that these age ranges are just approximations. Like adults, children are individuals; anything you say about any group of children will be true of some children in the group and not others. If your 5-year-old seems as mature as typical 8-year-olds, not just to you but to other adults, you should certainly take this into account when deciding if your child’s ready to get a debit card.
If you’re already sold on the benefits of getting a debit card at a young age, check out the options below or click here for more details on how to get one.
Benefits of having a debit card for children who are 6–8 years old
Online purchases and app downloads, not to mention underage influencers, are exposing children to card payments at an early age. Since it is around this time that children become able to understand money, access to a debit card at this age lets them start acquiring good money management habits as early as possible.
Very likely, it’s at this age you’ll start paying an allowance or giving cash gifts to your kids on holidays. If so, you’ll need to start teaching them about money management. What financial habits do you want them to learn? Do you want them to just spend everything they get as soon as they get it? Learn to save all or a portion of their income? Share a portion with family, friends, or a charity? Invest in undervalued equities? (Maybe not the last one. Most kids this age are terrible at analyzing financial statements.)
Whatever financial habits you want to start teaching your child, including debit card use, will make those habits more certain to take hold in our less-cash, albeit far from cashless, society.
Debit cards and children with ages between 8–12 years old
It’s commonly claimed that it’s at this age that children start noticing and wanting to have what their friends have. Parents who’ve seen toddlers swipe each others’ toys may think this happens much earlier, so let’s just say the phenomenon becomes especially pronounced at 8–12 years old.
If they’ve already been learning about money and money management over the prior few years, they’ll now start to think more seriously about how much things they want cost, how much more money they’ll need to buy them, and so on. As they observe you and other family members, not to mention their friends, buying things online and in stores, they’ll want to do the same.
Ensuring they have a debit card at this age will help them learn to do so wisely.
One key to helping your kids learn to save money for the things they want is to give them control of their own money. When you started paying them an allowance or giving them cash gifts, this is just what you had in mind, wasn’t it? A debit card for children is a great way to do this.
The best option may be a card tied to an application that lets you monitor how the card is used, so you can step in if things get dicey. Some apps may allow you to limit where the card can be used (at ATMs, in stores, online). Such apps are most common with prepaid cards. Prepaid cards also eliminate the risk of overdrafts.
Though they won’t usually include robust parental management apps and won’t prevent overdrafts (and resulting fees), debit cards tied to children’s checking accounts will give you more ability to monitor kids’ spending than cash.
Debit cards and early teens (12+)
Children who don’t show interest in how cash, coins, and debit cards work before age 12 will certainly start showing interest as they enter or near puberty. Their budding desire for independence, as well as peer pressure from real and virtual friends (and influencers), will make them eager to have their own accounts, start paying for things themselves and manage their own money.
They might also want to save to buy more expensive items, assuming you’ve made it clear you won’t just buy them anything they ask for. If you’ve made sure they see you saving and investing, this is a likely age for them to want to do more than observe. They may show an interest in earning some income outside the home, in which case you’ll want to find out what the laws in your state allow. In general, in the United States, children younger than 16–18 will need a work permit.
Though we believe children younger than this are ready to start learning about and using debit cards, cautious parents may choose to wait. That’s up to you. If you’ve attended college or just visited college campuses, you know that credit card companies will start offering your kids cards almost the day after they graduate from high school. We strongly recommend you introduce them to plastic and teach them how to use it responsibly before this.
What are the benefits of giving a teenager a debit card?
As you help your soon-to-be young adult establish more independence with a debit card, you’ll also make your own life easier. Rather than nag you for money to buy that new product a friend has, your child will learn to save up the funds then make the purchase with minimal parental supervision or guidance.
Getting a card helps kids learn that money needs to be used with care, not just spent on impulse. While schools and many parents care most about children’s academic performance or standardized test scores, the ability to delay gratification, such as by putting off spending today in order to save up for tomorrow, is more important to long-term success (Source).
Having debit cards of their own can help children and young adults learn to handle money responsibly, making them much more likely to succeed on whatever adult life path they choose. It will also prepare them to use their first credit cards more responsibly, ensuring they build good credit as early in life as possible.
Debit cards can teach kids money management
Benefits at specific ages aside, let’s summarize how a debit card for minors can teach money management skills. Debit cards, particularly prepaid debit cards, help children and young adults learn good financial habits that they won’t learn or won’t learn as well if you get them only a checking or savings account. Since debit cards pay from an existing balance, they are all “prepaid” in a sense. However, cards specifically marketed as “prepaid” prevent overdrafts in a way that checking-account debit cards don’t.
Here’s the list:
- Work and wages. By adding a set allowance to a debit card monthly or weekly, you’ll prepare children to use their paychecks responsibly if they ultimately end up as hourly or salaried workers. Even if you’re determined to make your kids into entrepreneurs, freelancers, or performers with irregular incomes, the wage-earner discipline they’ll learn from direct-deposit allowance will serve them well.
- Saving. Any sort of account — bank account (checking, savings) or prepaid debit card — will help your child learn about the value of saving. A debit card has the added advantage of teaching the discipline needed to delay gratification in spite of the ability to spend what’s been saved with the swipe of a card. Though today’s low-interest environment makes most bank accounts worthless for learning about the wealth-building effects of compound interest, some prepaid cards feature “parent-paid interest,” meaning you can pay your kids an interest rate that does show how compounding works. Of course, if your kids are especially frugal, this could end up costing you a lot of money.
- Spending. Using a debit card for online and in-person transactions teaches kids how to take part in the buy-side of modern commerce and how to do so responsibly.
- Investing. Children who use debit cards to buy things they can later sell for a profit can learn their first, formative lessons about investing. In the value investing community, the story is often repeated of how the young Warren Buffett bought packs of bottled Coca Cola to sell individual bottles at a profit. Such childhood lessons obviously served this famous billionaire investor well. Buffett learned his childhood investing lessons using cash, of course, but the same principles apply now that plastic is the main medium of most commercial activity.
- Budgeting. Though giving children whatever they want if they pester you often enough may teach them skills they can use as political or charitable fundraisers, having to limit purchases to what the money on a debit card allows will teach them habits that will help them stick to a budget throughout life, however high or low their adult income.
- Giving. The payment method of choice for most charities is plastic. Debit cards can help kids learn how to plan for charitable giving so that it never interferes with their saving and investing. Always set aside a set percentage of their allowance or other income to help those in need will allow them to fulfill moral duties without suffering financial harm. As an added bonus, a well-established habit of giving may provide tax benefits in adulthood.
“I’m convinced,” you say. “But now what? I don’t even know how debit cards for kids work. And how do I get one for my child?”
How do children’s prepaid debit and other debit cards work?
Convinced that a debit card will help your kids become financially literate and learn to manage money wisely, you’re wondering what to do next. The first thing to decide is what sort of debit card to get. As you already will have gathered from the preceding, you have two basic choices:
Prepaid debit cards
These are cards you preload with funds. Managing them from a family account, you can usually set them up to pay allowance (or to pay for specific chores) and add spending controls (instant notifications, spending limits) to make sure your kid’s spending doesn’t get out of control. Learning always involves making mistakes; these protections can prevent the mistakes from getting too costly. Prepaid cards typically provide better protection against overdrafts than cards tied to checking accounts, often include money-management and teaching tools (such as quizzes) that will benefit your child, and usually charge a monthly fee. Find out here if you want to know more on how do prepaid debit cards work.
Debit cards attached to checking accounts
These usually don’t charge a monthly fee, and children might not be eligible until age 13. (Thirteen is how old you have to be to get a debit card at most banks.) Though the bank account will be in your child’s name, you’ll need to sign as co-owner. You may also need to have your own account at the same bank. Bank accounts for kids vary widely in features, so be sure to shop around till you find the best checking account for your child. As well, most of these cards lack the teaching tools commonly included with prepaid debit cards for kids. Commonly but not always: Copper Banking and Greenlight-powered Chase First Banking both add financial learning tools like quizzes to cards tied to checking accounts.
A good way to judge if children are ready to start managing their own plastic is to pay attention to the sorts of questions they ask. If their questions show that they understand that a prepaid card represents a cash balance that has to be monitored and managed, starting kids out on a prepaid card before they’re eligible for a checking account could be a great idea.
Which card should I choose for my child?
This list is not exhaustive, but comparing the features and fees of the following eight cards should give you a better idea of your options:
Cards tied to checking accounts
If your child is 13 years or older, you may wish to consider one of the following checking-account-based cards:
If your child is too young for a checking account, you’ll need to start with a prepaid card. If your child is old enough, but you want greater parental control and easier monitoring than a checking account provides, you’ll also prefer a prepaid card. Either way, here are some options to consider:
Are prepaid and debit cards safe for children?
Bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC), so neither you nor your child will lose money because of a bank failure. Unless the entire U.S. government goes bankrupt, of course, in which case we’ll all have more important things to worry about than children’s bank accounts. Bank accounts and debit cards for minors must comply with the Children’s Online Privacy Protection Act (COPPA), so your child’s information will only be shared with your consent. Just be sure to read all the privacy disclosures before signing them.
It’s also worth noting that a lost debit card is easier to replace than lost cash. And if someone uses your lost debit card, your bank may not hold you responsible. In contrast, no one’s going to reimburse you when someone spends your lost cash.
- Typical kids are ready to start learning money management and debit card management at age 7.
- You can get your child a prepaid debit card at age 7 or younger.
- At most banks, you can get your kid a checking account with a debit card at age 13.
- A debit card can help your child learn financial responsibility and impulse control.
- Debit card terms and features vary widely, so it pays to shop around.
- FDIC insurance, NCUA, and COOP compliance make these cards safe to use.
Getting a debit card can help your child develop good financial habits, making the transition from childhood dependence to adult independence a smoother and more successful one. Teens and younger children should start learning about money, responsible spending, and the need for savings as early in life as possible. Getting them a debit card as soon as they’re ready, typically around age 7, is one way to do this.
- Habit Formation and Learning in Young Children — University of Cambridge
- Study Suggests Ability to Delay Gratification One of the Most Powerful Predictors of Success — Science Trends