What are the pros and cons of giving your kid a debit card?
August 27, 2019 12:22 PM   Subscribe

Have you given your young teen a debit card, and how has it worked out for you? I am considering it as my kid is going into high school this year.

I am considering setting up a debit card for my soon to be freshman in high school.

Generally, I am okay with it, b/c I'd love to just set something up, I can monitor, put $ in, not have to find cash Monday morning - and it maybe a good way to get her to be more accountable (to the account.) But, I am also somewhat concerned that her general relationship to money is not great - she's had an allowance for some years, but she's the kind of kid who spends it on candy, impulse buys, etc. I think this is partly b/c she went to a very advantaged middle school, where a lot of her friends were pretty well off, so she sees other kids spending a lot of money. (She gets to spend more than most, yet feels like she has "no money".)

- In your experience, what has been the advantage/disadvantage of going from cash to card for your teen?

- Has your teen's relationship to money changed at all, good or bad, b/c of the card? Is she going to demand I refill it more often b/c its not "real" money?

- Has class privilege come up for you? We live in NYC, she's going to an open school, is she going to make other kids feel bad when she pulls out plastic - and they don't have necessarily have even spending cash?

- Bonus Q: Are there specific companies you've used and had good or bad experiences? She's pushing for something called "Current", are there others that are preferable?
posted by RajahKing to Work & Money (15 answers total) 12 users marked this as a favorite
I have been using GreenLight with my 12yo and it’s made a lot easier; it also doesn’t do anything my bank itself couldn’t do better with a cheapo free checking account.

Upsides: I don’t have to give a weird amount of allowance in cash. There’s a source of truth I don’t have to maintain for how much money he has. I can automate allowances. He can buy stuff online.

Downsides: None with the concept, although in practice there are some frustrations. I want him to save a dollar for himself and save a dollar for charity each week, and Greenlight will only automate that as a %, not as a flat % amount. So I might go back to cash for the savings accounts (as such).

In short: get your kid a checking account (you may need to be the primary signer) at your bank, and use bill pay to automate everything.

Also having been a teen in NYC, and having a near-teen in another area, I would assume that everyone uses apple pay and Venmo and CashApp anyway!
posted by chesty_a_arthur at 12:38 PM on August 27, 2019 [2 favorites]

In my experience with my own kids, one of the key learning things with an allowance is make sure that it includes some essential items so there is pain if she spends it all on junk. If it is just for fun, she won't learn to save and manage her impulses.

So, she may demand that you refill more often - that is the teachable moment for you. You need to set a realistic budget and hold her to it. If she overspends, be clear what happens next. If the allowance includes essentials, what is she supposed to do when she messes up. (You know she will, that's OK, that's how they learn.) For example, my kids liked school lunches. If they couldn't afford it, food from home was free so they didn't starve. For other things, we might loan them money but then take it off the top (plus "interest") before giving them the next allowance.
posted by metahawk at 12:38 PM on August 27, 2019 [7 favorites]

When I was in high school, I got my first bank account in my name and it was 100% my responsibility. I would recommend doing that. I don't think you can teach responsibility without giving responsibility if that makes sense?
posted by whimsicalnymph at 12:48 PM on August 27, 2019 [18 favorites]

One thought, whatever set-up you use, make it easy for you *and her* to monitor daily purchases/withdrawals and be conscientious about checking it so there's no end-of-month-where-did-the-money-go? crisis.

Source: a much older family member who discovered the day before university started that she'd spent all her summer job savings that was supposed to go towards text books and meals because she never opened her bank statements.
posted by TWinbrook8 at 12:49 PM on August 27, 2019 [4 favorites]

She should have her own bank acct, with you as the responsible adult required for minors to have accts.
I had my acct by age... 12? At first it was just for gift money and a lark, but soon enough everything was for real.

Here's a thought: how can she get a job if she doesn't have a place to deposit her paycheck? It would seem she's not so privileged as to never have to hold a job, and getting a job is one thing she can do when she complains there's not enough money in the acct.
posted by SaltySalticid at 12:53 PM on August 27, 2019 [8 favorites]

Card is *so* much more convenient than having cash on hand for allowance. Similarly, there are sometimes where we could say MiddleChild - you and Youngest go walk over to A&W for dinner - we'll reimburse the cost for dinner. Also he can ask us to buy stuff online, and we can transfer exact amounts from his bank account.

We didn't randomly "refill" it - our kids get an allowance based upon chores done at home. Our school store / field trips etc either take cash only, or online payments from a parent's account. Debit cards can't be used at school, so there's nothing our kids ever "needed" to use their debit cards for. Skipping the chores, or half-assing them gets (pre-explained) deductions to their allowance. Any "refilling" is for things he bought at our request.

Our kids seem to have viewed the debit card as real money. One is still starting out, but the other managed his well; got a job, saved for a $6500 truck, and eventually got an apartment and moved out. He still can't seem to get a credit card, so we're still doing transfers for anything he wants us to buy for him online.

If the child can lose track of money, an actual bank statement can make it possible to track. With cash, once it's spent it's gone with only a fleeting memory. Possibly there might be a receipt but with many kids that's also gone after a week. Most bank accounts go back a year without requiring one to manually save statements to refer to, or pay for old statements. And yes, she'll likely have a number of "ATM, 23.50 ($20+3.50 in service fees)" statements, but still that at least shows how much cash she had available at various times. Practice going over the statements with her and maybe categorizing things, "So, you've spent X amount at various corner stores over just a month."

Just be absolutely clear that the bank will not allow her to go into overdraft. Really sure. I remember with our first accounts, we had to specifically sign to decline $200 overdraft "protection" (for $35 a pop any time the account goes below zero plus credit-card-like interest rates).

Make sure she's aware of any fees there might be if she is declined after attempting to over spend, and I'd advise having no pity in covering anytime that hits her. Possibly excepting if it's because she was paying for an errand you asked and promised to reimburse her for (if not, you want to be good about asking her if she's got enough to cover the cost (assume it will be more - $60 for 2 kids to eat at A&W)).
posted by nobeagle at 1:00 PM on August 27, 2019 [4 favorites]

Link it to a Mint account that you're able to access. Make it a condition of the debit card that she goes into Mint to categorize every transaction she makes. This will help her set up good habits--where does her money go? She can set up budget categories tied to these transactions. If she spends more than, I don't know, $20 on candy in a month she'll get an alert on her phone like hey, you're overbudget on candy.

Getting to know this kind of stuff in a limited, controlled way will set her up well for when she does have to manage her own money.
posted by phunniemee at 1:01 PM on August 27, 2019 [4 favorites]

One caveat: you'll need to make sure the attached account doesn't have any overdraft protection. By default, lots of banks will happily let you continue using a debit card when your account has no money in it, and charge you a $35 dollar fee per transaction for the "service". You can generally decline this service, but the banks don't always make that an easy or obvious thing to do, because those sorts of fees are a big profit generator for them.
posted by firechicago at 1:03 PM on August 27, 2019 [9 favorites]

My kids 15 and almost 17 have minor accounts attached to ours, since they were 13. We transfer in their allowance and additional funds as needed (if they are self buying something we previously agreed to pay for, or if they buy something for the household as a favor). We can see their transaction histories and occasionally provide commentary.

Our kids are self-directed when it comes to saving up for things; We don’t micromanage that anymore (we used to force-budget a portion of their allowances but now they do it themselves when they have a future purchase in mind).
posted by padraigin at 1:20 PM on August 27, 2019 [3 favorites]

I got my kids in Westchester County debit cards. I would deposit a generous agreed upon amount monthly. Actually on the 15th so they would have to pay more attention to it.

I am somewhat of a hard ass in that I made it clear that I would never negotiate an early refill. I also told them that I did not care what they spent it on (legally) as they need to learn to prioritize their spending. If they wanted to spend it all on candy bless them.

My system worked for my family. My kids now in their 20s learned to either be responsible about their spending or accept the consequences of being broke.
posted by AugustWest at 1:22 PM on August 27, 2019 [1 favorite]

I would add in a component of “at age X, you will start paying for necessities from your money (including whatever allowance you give them)”

The worst thing my parents ever did for financial management was that I got a job and they were still taking care of necessities. I worked at an ice cream shop and mostly got paid cash but I also never had to gas up the car or anything so it meant that I had an insane amount of spending money given that all my needs were covered by my parents (even though I did save a lot as well).

The best thing they ever did was adding me as an authorized user to their credit card. You don’t ever have to give them the card if you don’t want to. It meant that I had years of credit history and a huge credit line “available” to me and a fantastic credit score by the time I left high school.
posted by raccoon409 at 1:54 PM on August 27, 2019 [12 favorites]

Some system where you are able to track payments would be preferable to an ATM card, no? Depends on your kid; I personally would not have been smart about cash spending at 14. The suggestion to track purchases in Mint or Excel or something is a good one if you do go with an ATM card. It's also hard to remember purchases after the fact, and too easy to fudge (heh) the amount spent on candy vs the amount spent on school supplies.

This also depends to a large extent on how much access your kid has to sources of spending without a parent present. I grew up in deep suburbia, so until I learned to drive, my world was home -> school bus -> school -> school bus -> home, and if I wanted to go anywhere that would accept my hard-earned greenbacks, I needed an adult to drive me. Obviously if you live in a city with public transit, your situation is different. I did get added to my parents' credit card when I started driving, so that I'd always have a source of funds if I ran out of gas, but my dad monitors all his accounts like a hawk (still does) so they would have known right away if I'd gone on a spending spree at the mall (or more likely in my case, at Borders).
posted by basalganglia at 3:19 PM on August 27, 2019

I would add in a component of “at age X, you will start paying for necessities from your money (including whatever allowance you give them)”

I agree with this advice—a recent thing we just started doing was, we will give the kids a small budget for new clothing seasonally, but if they sell items they no longer use, we will match whatever they earn up to a hard limit. It’s still technically giving them money for necessities but it encourages them to be realistic about what they own and use, and they have blown past our matching limit ever since we set it, particularly since the initial budget we’ve offered as a baseline was intentionally smaller than it had been in the past when we were just taking them out to buy school clothes. They’ve both gotten into the excellent habit of regularly culling through their wardrobes and learning to be more discerning about what they buy.

Now that there are a few great resale apps for younger kids’ clothing, this is something you don’t have to wait for them to be wearing adult sizes to start.
posted by padraigin at 5:08 PM on August 27, 2019

We gave our 11-year-old a GreenLight card. It's been great. It changed her relationship to money, and trips to the store go much smoother. Instead of nagging me for cash to buy random stuff, she carefully considers what she wants and decides for herself if the expense is worth it. She also weighs whether or not buying something now is worth making it harder to reach her savings goals for upcoming trips.

(I agree that a checking account and a regular debit card would probably work just as well, but GreenLight does a really nice job of integrating with phone apps. I think the ease-of-use and the visibility helps.)

I haven't noticed any class issues. She goes to a public school in a middle-class town, and there are kids there with new Apple watches and the latest iPhones. A debit card is small potatoes compared to that.

I haven't encountered any disadvantages yet. Cashiers are sometimes skeptical that she has her own card, but I let her explain, and navigating that is good practice in being independent :)
posted by diogenes at 7:42 AM on August 29, 2019

Another teachable moment here is allowing her to invest some of that money. The younger you are when you start to understand the power of compound interest, the more life-changing that knowledge can be.

Every year we give our kids a few hundred dollars to invest into stocks. They research the companies and we pull the trigger on the investments. Admittedly, their stock choices are heavy on the Disney, Skechers and Google/Alphabet (because Google owns their favorite thing, YouTube) but I supposed that goes along with Buffet's advice that you invest in what you know.

Unfortunately, as income disparity grows, understanding various investment vehicles becomes even more important. Our economic system favors the affluent in part because investments are generally taxed much less than income.
posted by Ostara at 11:05 PM on September 2, 2019

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