Kids. They grow up so fast. But how fast is too fast when it comes to personal finance?
A slew of banks are offering debit cards for kids — among them Chase, who launched Chase First Banking in October 2020. Available for existing Chase customers (i.e., parents and guardians) the card can be used by children ages 6 to 17.
There’s something funny about imagining a young child with a debit card. It’s not unlike picturing a kid wearing adult clothing and drinking coffee while checking the stock market on an oversized tablet. Amusing imagery aside, banking for kids is on the rise, and it inspires the question: Is it really a good idea to give your 6-year-old access to your bank account? What are the pros and cons?
Pro: It Can Help Kids Learn About Money
“Giving a debit card to a child is a great way to build a relationship with money,” said Ryan Kaysen, CFP, a financial planner at Integritas Financial, LLC. “Hiding from the taboo topics such as budgeting, debt, income and spending will create issues that will last throughout a person’s whole life. It is never too early to start learning about money so long as the parents handle the behavioral side of using a card.”
Con: It May Make the Concept of Money Too Abstract
Andrew Griffith, associate professor of accounting at the LaPenta School of Business at Iona University, is firmly against the idea of giving young children debit cards.
“Most children are still learning what money is at that age, and to take that concept abstract makes it much harder for a child to understand the role that money has in our society,” Griffith said. “Most small businesses do not operate in a cashless model. This is especially true when dealing with small dollar purchases.”
Pro: Some Parents Find It Helpful
Dennis Shirshikov, strategist at Awning, gives his 5-year-old a debit card to use at the store.
“It doesn’t make sense to teach the kids about cash when debit cards are the norm,” Shirshikov said. “They need to learn that they should track the balance and expenses — we help with that — and that there are times when it gets declined — we allow that to happen, too.”
“I personally have signed my child up for [a debit card],” said Sam Nelson, owner and principal planner at EVL Events. “I think it’s a great idea because (1) it is way easier for them to lose physical money when they have it lying around. They also seem to spend [physical money] fast. And (2) most kids think credit cards are amazing — so it’s the hype factor for them.”
Con: It Could Be Confusing for Them
“I think a 6-year-old lacks the mental capacity to truly understand the value of money and that too of a debit card,” said Bruce Mohr, senior investment advisor and credit consultant at CreditSage. “Don’t get me wrong. I truly think children should be taught from a young age how to use money, whether it’s in cash, plastic or digital form. But, if you give them a debit card at the age of 6, you’re not going to be achieving much. As a credit consultant, I’ve seen people drowning in debt mostly because they were never taught financial fiscal responsibility.
“To counter that, we must change the way people think about money — and the sooner we start teaching them, the better,” Mohr continued. “If you asked me personally, I would give my kid a debit card when they’re at least 12 years old. Before that age, I would explain to them the basics of how money works and how to utilize it properly. Remember, the best way to teach someone about money is to not give them access to it but to build solid foundations for it.”
Pro: It’s Easier To Replace Than Cash
Nelson added that while it’s true that a 6-year-old is likely not responsible enough to manage a debit card and be trusted not to lose it, replacing a debit card is easier than replacing cash.
Con: It Can Open the Gates to Overspending
“Firstly, teaching your child financial lessons by awakening their spending habit at such an early age may only teach them to know how to overspend without minding the consequences,” said Mark Stewart, an in-house CPA for Step By Step Business. “This is because, at that age, they cannot bear the consequences of any adverse actions they might take.
“For example, they cannot have one or multiple income streams to help them repay their debts, request a forbearance, or declare bankruptcy when they cannot repay. So, technically, as their parent, you will still have to take responsibility for their action. Hence, if you are going to do so, why bother giving them a credit card when you can monitor their spending by handing them finances when their need for it is justified?”
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