I read an article on Kiplinger today that I just had to write about.
I clicked on the headline because I thought it could be some useful information to share with my readers, but I found myself disagreeing with just about every point the author was making.
The article is titled, Say ‘No’ to Debit Cards for Teens, and makes the following points about teens and tweens with debit cards:
- Debit cards encourage kids to spend.
- To kids, plastic is plastic.
- Parental controls are overrated.
- The fees are high.
The author’s feelings are that teens don’t learn anything about money management from using debit cards, and that cash is better.
I disagree because I think cash is less and less prevalent with each generation. I’m not saying that’s a good thing or a bad thing, but it is a reality. And if parents want their children to understand how to use debit (and credit) cards responsibly, then they need to use debit and credit cards in a semi-controlled environment before they’re magically given one with a cool t-shirt in college.
I also think that this is related to her first point about encouraging kids to spend. I see numerous posts on the Internet about how people who use credit cards spend more than those who use cash. I think that’s probably true, but I think it’s because there’s a disconnect in people’s minds about where the money is coming from. I use a credit card for just about everything I buy, and I’m a total tightwad – just ask my wife.
The reason is that I think of the money leaving my bank account every time I swipe that card. In short, I use it as a debit card and think of it like cash.
My parent’s generation primarily used cash and checks for purchasing. Did people of their generation spend more because they used checks instead of cash? Some probably did. But the point is that there is a lack of financial awareness involved, and plastic or check is just the medium.
If you don’t track your spending, if you don’t spend less than you earn, they you will have money problems regardless of what medium you use to spend it.
So I think a reloadable debit card is an excellent educational tool for teens today because they will likely find using cash to be less favorable than their parents generation, and it’s better they learn how to use plastic while they’re young and the potential for financial damage is less.
Her argument about parental controls is a silly one:
“if you’re worried they’ll spend money on Internet porn, they shouldn’t have a card in the first place. “
I agree that you probably have a bigger problem on your hands in that case, but that doesn’t mean that the “Parental controls are overrated.”
I can’t argue with her point about fees though.
The Current Card levies a monthly charge of $5, or $50 a year. That’s a lot to pay to track your kids’ allowance when as adults you can get a checking account for free or a credit card with no annual fee.
Source: Kiplinger
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Debit/credit cards are just medium in spending. It’s really up to the person how he would manage his finances wisely. Allowing teens to use debit/credit cards at the right age would not give them harm if parents have teach them the value of money from their early years.
That’s pretty much how I feel too, Noel.
I think that often times, parents give their kids a credit or debit card and let them figure things out on their own and that’s a recipe for disaster.
Giving a kid a debit card and setting them up with a free account at Mint.com could be a good way to teach budgeting/financial skills.
Most kids these days spend enough time online as it is (facebook, MySpace, etc.), so it’s easy to teach them to log in and get a snapshot at where their allowance is going…