A debit card can be a tool to help you establish a financial education for your children so they learn how to manage money. Here are some ideas to consider
Teaching our children how to manage finances is not a simple matter. While there are studies that prove that the younger they start to understand money, the less financial complications they will have; the reality is often more complicated for many, especially if they start to deal with adolescence. It’s never too late to start, and if you’re thinking about giving them a debit card so you can teach them how to manage their money, you should weigh the advantages and disadvantages of doing so. We can help you.
First of all, you should check the laws that apply to the state you live in, as each local government has different rules about opening bank accounts for minors. Then, you should look for different options in the market to have more control and security that your child will not waste money.
In fact, one of its great advantages, compared to a credit card, is that the teenager will not be able to spend more than the money in the account, thus avoiding the problem of indebtedness. Unless you have an overdraft fee.
The advantages of giving your child a debit card
Let’s start with the benefits of giving your child a debit card, even regardless of age, although we’re thinking more about teenagers.
You have greater financial control (and so does your child).
Giving your child a debit card can be a decision that revolves around their age, maturity and the trust you have in them. Just keep one thing in mind: no one is exempt from mistakes. You, as their parent, should be their guide, their mentor and be aware (and make them aware) that financial mistakes have consequences. And a debit card makes it easy to have administrative oversight to catch mistakes and correct them.
For finance, the sooner mistakes are made, the easier it is to correct them and learn from them. A debit card allows you to develop good spending habits with a safety net that you can control. There are options that allow you to set spending limits, including where they can use it.
They can recognize the value of financial rewards
It’s not just credit cards that offer rewards. There are banking options, such as the Capital One Money Teen Checking debit card, that have no fees or minimum maintenance balances, can use more than 70,000 ATMs, earns interest and can even be opened for 8-year-olds. It also offers a birthday gift for the infant.
Experience is the teacher
Some people have a hard time learning the right way, unless it is empirically, that is, based on experience. Beyond reading this article, the most important thing is to put it into practice, that is how you can make smarter decisions about money. There are financial institutions that offer educational tools to apply the learning to your respective accounts.
The disadvantages of giving your child a debit card
Rather than disadvantages, these are points that parents should consider when giving a debit card to their child in order to supplement their teaching about money matters.
The card is not physical money
As we explained above, some people learn through experience, so the “virtual” part of having money on a card may not be the most effective in your child’s knowledge, as they are likely to need paper money to do math and be more aware of how they use money. When you have coins and bills it feels more “real”. With a debit card the idea of money can be a misconception of just swiping, tapping or registering a PIN. You almost get the feeling that nothing was exchanged for the purchase or service.
To keep this from being a disadvantage, it would be best to do a financial mix of resources to make learning more effective.
It can be expensive
There are options that have no annual fees, but come with relatively low limits, such as $500 per day. Other companies offer higher spending limits, but with monthly or annual fees.
You should also check that they don’t have overdraft fees or that it can be blocked so that the debit card can’t be used if it has an insufficient balance. Otherwise, as we said, the young person may believe that he or she has an unlimited balance and the bill for the loan may be very high.
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