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Why, And When, Should You Give Your Child A Debit Card

If you are a parent, you must be aware of your child’s piggy bank or jar (a secret store of money or valuables). Many children learn to keep their savings in a way they feel comfortable withdrawing off. But when they start growing up as teens, they love to spend more a movie with friends, field trips, lunch schedules and much more. Some may need a bank account to make purchases with their debit cards.

Different options are available to account holders like traditional checking accounts (which makes your financial life easier) with debit cards, and prepaid cards, that can be managed jointly by both the parents and with a child. Your child has an access to, control over their own cash, but it also allows parents to keep an eye on the spendings and provide them guidance as needed.

The chief executive of JumpStart Coalition, Laura Levine, while promoting youth financial literacy, said, “You can ask your own credit union or bank if they offer you a joint account facility with your child.” Some banks don’t allow minors to have their own debit cards until they reach an age of 16, but other institutions offer them even if they are 13 or even younger.

There are certain features which parents should look for. For example, low or zero fees for maintaining the account, convenient access of A.T.M, online monitoring of account and the ability to set limits on spending.

USAA checking account and teen savings offer a “Youth Spending” account to put your teen (children 9 and older) on the route to financial responsibility. They will have their own debit card, but this does not give them the freedom to spend all their savings. Parents can keep track of their account by using a mobile app and they can set spending limits by using this app. In case if their child exceeds the spending limits, parents will receive a text message.

J.J.Montanaro, the USAA financial planner, said, “You can access their account and evaluate what and how they’re doing.” Practically, to open an account with USAA, you or any member of the family must have a former or current military affiliation)

Nerdwallet, the financial website, recently recommended different accounts for children, including Capital One 360’s Checking (fee-free) account and Alliant Credit Union’s Free Teen Checking account.

Nerdwallet card expert, Sean McQuay, said, “It is more a preferable option to have a debit card linked to your checking account  rather than having a prepaid debit card because savings account and checking account could be linked together to strengthen the power of setting money aside for meeting long-term goals”. He further added, “some prepaid cards might offer the ability to set aside the funds, but the amount usually does not gain interest.”

There are few prepaid cards which can work well for teenagers. According to the recent Consumer Reports ranking, Bluebird from American express is on the top to offer family accounts. An adult will be responsible for opening the main account for their family members. An additional debit card can be given to up to 4 members ages 13 or above. An option like monitoring the accounts online, restricting A.T.M access and setting the spending limits, will be available to parents if they choose to do so.

Christina Tetreault, Consumers Union staff lawyer concentrating in financial service areas said, “The type of account to be open depends on how the teen will need to use it.” She further added, “A high school student will more interested in shopping online or at malls but a college student will more consider paying bills online.”

If you have a prepaid card, you should protect yourself by reading the fine print. Some may charge you for loading the funds onto the prepaid card or for speaking with their call center representatives. It would be a smart approach to check these charges before. M. Tetreault said, “According to the latest federal rules which will take effect next year, all prepaid cards will come with the disclosure of fees and more details transparently.

Here are some interesting questions/answers for parents and teenagers which are planning to have a debit card. Have a look!

At what age of my child, can I open a spending account?

Ms. Levine(President and CEO) of JumpStart presented her point, “It depends on at what age your child can handle cash responsibilities of their own, some may make it earlier when they’re in the middle of their high school or some make it later, even if they complete their high school. Allow your child to make minor mistakes under your tutelage, she further added, than to wait for major mistakes (great financial loss) when they’re on their own.”

Do I need to link my teen’s checking account to a savings account?

A separate account for spendings helps you to save more for long-term specific goals. NEFE (The National Endowment for Financial Education) a leading nonprofit foundation spokeswomen, Patricia Seaman advises to wait a while before you plan to link two separate accounts. The reason she said that is to first make sure that your child is little sensible and has the discipline to save the money in the savings account.

What if spending exceeds balance?

According to Ms. Seaman, “The best way to control your child’s spending is an automatic decline of transaction whenever he or she tries to buy something in excess of a debit card limit. The decline would teach them to take care of their future spendings and to avoid overdraft fees.”So if your child is operating an account with overdraft protection (purchases will not be declined), he or she will be charged with an overdraft fee. Ms. Seaman further said, “Let them learn from their mistakes and let them get embarrassed at the fast food restaurant.”

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