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Giving a debit card to your child is another milestone on its path to financial literacy. But it can be difficult to decide which is the best option and whether to use a regular debit card or a debit card product specially designed for children. The later one is a relatively new segment and was not available some years ago.
Let's first clarify the differences between those types of cards:
Regular debit card attached to a checking account: Depending on the rules of your bank their might be age limits for issuing children a debit card. It varies also whether those cards offer any additional control mechanisms for the parents to control the spending of their child. If the child has also a savings account at the same bank it is easy to transfer funds from checking to a savings account. In most cases, there are no fees for these cards.
Prepaid debit card for children: Those cards come with different add-on features enabling parental supervision and opportunities to teach and learn about money handling. Some of them include games and quizzes, some even investing tools. They are provided by banks or independent companies. As the fees and functionalities vary a lot, you need to have a list of features you are requiring for your kid before making a comparison.
One question every parent has is what is the best age to give a child a debit card. There is no common answer to this ad this depends much on the maturity of the child. It has to be able to understand the concept of "virtual money" on a card compared to the coins and bills in their purse. Many parents choose to give a debit card to their children once they are getting more independent and start doing purchases regularly without their parents - some when during middle or high school. However, it is important to introduce them to the concept of planning their spending and saving before they get their card so they develop basic money handling capabilities before having a card in their hand.
If you don't need all the bells and whistles a special children's debit card is providing, you might go with a regular debit card linked to a joint account with you and your child as owners from your own bank. By doing so you get the same access to the account information as you have for your other accounts. This works well if you trust that your child can handle a card without much control from your side. This might not be enough for younger children or children without good spending habits. In this case, it is worth looking into the products designed especially with children and teenagers in mind. There are many players on the market with many different features including:
Spending limits and control: Cards may offer daily spending limits or more detailed limits, e.g. merchant-specific limits
Limits for online shopping: restrictions might be on the amount and/or store- or category-specific
Allowance payments: Enables the payment for weekly, bi-weekly, or monthly allowances from the linked parent account
Chores payment: Some cards enable to assign chores and make rewards payments upon their completion.
Funding: Money transfers to and from banking account from the parents and/or children's savings account
Investing: Some cards offer investing functionalities and learning opportunities (through a custodial account)
Financial education: Many different apps, games, and guides are provided
Fees: Most of the cards come with a fee. Some cards offer discounts or packages for families with more than one kid.
These websites help you to compare different cards and to find your pick :
If you are looking for more information on the topic of financial education of children, check my earlier blog articles about teaching kids about money and about how to discuss about money with children.
"Children and Money" will be the topic of our September zoom-meeting of the "Money Talk with a Daily Money Manager"-series hosted by Rita Kuehnis, SDS Smart Daily Services LLC. The meeting is scheduled for Thursday, September 16th from 6 - 7 pm PST. Register here.
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