Educating kids on building wealth is essential for their future economic success. Parents can start by opening a bank account in their child’s name. Unfortunately, many adults struggle with their finances, so, understandably, parents are concerned about saddling their children with the responsibility of a bank account or debit card too soon. Fortunately, personal banking has become more convenient than ever. Banks allow parents to open accounts for their children to monitor their spending activities and teach them solid financial habits they are ready.
What is the Ideal Age to Opening a Bank Account for Your Child?
Bank accounts with a debit card can be a perfect way for children to get started in the financial world. They provide children with the opportunity to handle money while still falling under the jurisdiction of a parent or legal guardian because they are officially on the account as a joint account holder.
The parent primarily determines the age at which a child should open a bank account. While banks often limit checking accounts to adolescent customers, parents can open savings accounts for their child’s higher education or future at almost any age. Even with small monthly payments, interest is still earned on balance, which can help those regular deposits grow into a significant asset when your child is eligible to access the account. Because savings accounts are not used daily, the value is more financial than educational. As your child becomes older, you should think about opening various sorts of accounts to help them learn via practical experience.
Why Should You Give Your Child a Debit Card?
Handing a debit card to a child is ultimately the parent’s personal choice. Much depends on your judgment and the maturity level of the child. As a result, children are better prepared for handling increased monetary amounts in high school, college, and adulthood.
A debit card provides a physical link between the value of money, spending, and the goods or services received. While cash can achieve the same goal, debit cards and digital payments are more commonly used nowadays.
Obtaining a debit card for a child can assist them in developing good financial habits. A debit card, for example, can be a helpful way for kids to learn the fundamentals of:
- Using banking apps, online tools, and text alerts to keep track of expenses
- Using an allowance and earnings to create a monthly spending plan
- Understanding the difference between wants and needs
- Using a mobile phone to make secure debit card payments
Children can also use debit cards to pay for school trips both domestically and internationally or when visiting relatives.
The Risk of Giving a Child a Debit Card
Giving your child a card has several significant advantages, but it also has some disadvantages that you should be aware of.
Most parents overlook the consequences of giving their unprepared teen a debit card. If the child is not ready for the responsibility of using a debit card, they may have to pay replacement card fees or, worse, become a fraud victim if the debit card is lost and used fraudulently.
Other difficulties could include the child’s refusal to say “no” to any demands from friends. Friends can quickly deplete your child’s bank account by asking your child to buy them lunch, “share the wealth,” or treat them to vending machine treats and snacks.
One should expect a child to have a natural love for spending and a dislike for saving if they use a debit card before developing the habit of keeping a portion of everything they earn. Saving will become an immediate deterrent, preventing them from spending.
Is My Child Ready for a Debit Card?
Having identified the risk attached to giving an unprepared child a debit card, there are a few ways to ensure a child can adequately use the debit card. Consider the following assessment to see if your children are ready:
When a child realizes the value of saving
It is not rare for children to spend every dollar they are given. They must, however, understand how to save money as they get older in order to make future transactions. On the other hand, you must first help him or her recognize the benefits of saving by tracking savings balances and creating charts. The habit is more likely to overcome the preference for squandering 100% of their money.”
What they do with their valuables
Often parents give their children a phone before permitting them to use a debit card. A phone is beneficial for safety reasons, but it also allows children to demonstrate accountability and responsibility. If your child can keep track of their phone and adheres to the data and general usage guidelines you’ve established, they may be ready for a debit card.
When a child demonstrates that they can handle money
Children should be taught that a debit card is equivalent to cash. Basic lessons include:
- Swiping a card to make a purchase.
- Checking your balance.
- Sending money to complete the transaction.
Beginning with a debit card before learning about cash can lead to a disconnect between purchases and balance. Once the child has demonstrated that they can handle some cash, the parents should open a child’s bank account with a debit card.
Allow the child to shop on their own.
Allowing them to spend a few dollars on a treat can be an excellent place to start. Making a monetary connection between the items you bring home from the grocery store and the purchases you make as a family helps children understand the value of a dollar. You can involve your children in purchasing school supplies, clothing, and other larger purchases when they’re ready. They will better understand what things normally cost and the importance of looking for items up for sale, and defining a budget if they take an active role in making purchases.
Take Away
It is crucial to avoid forcing your children to grow up too quickly by trying to equip them with knowledge, skill, and experience not suitable for their level of maturity. While it is vital for children to learn banking fundamentals, they should not be given too much autonomy too soon.
