Kevin at No Debt Plan asks why more people aren’t worried about teens with debit and credit cards. Well, I’ll have to join him in being concerned about teens with credit cards. But I while I didn’t have a debit card in my early teens I got one in my late teens and did very well with it. In fact, I think it’s a valuable tool.
Kevin’s primary concern is a valid one. He fears that teens are being acculturated with the idea of just swiping for their purchases, not thinking about money as money. I wrote about this during the very nascence of my blog, that the well-oiled machine is threatened when we stop to think about a purchase. And that’s why I’m not sure if credit is as good a learning-tool, because it’s not as immediate.
What Having a Debit Card as a Teen Taught Me
Having a debit card taught me that once you spend the money, it’s gone. Boom.
I know cash is supposed to function that way too, but the truth is that when I take cash out of the bank, unless it’s for something specific, I have a hard time putting it in my mental register as “counting.” It’s already out of the bank and therefore as good as spent. Wrong? Yes, but it’s how I feel. Checks are more permanent, but they have that nervous, waiting period while you want the person to hurry up and cash them.
But debit? Instantly gone. It doesn’t sit in your pocket like cash and it can’t be canceled like a check (though debit transactions can be undone, it’s not as simple as calling the bank and canceling a check #).
Since my banking was online from the moment I got my debit card, I could see every purchase right after it was made and keep track of my account without using a register.
I also knew that I would lose money to fees if I over-spent or broke any of the other rules. And I knew about ATM charges, etc. My parents made sure that I knew and as a teen it really hit home because I wasn’t dealing with a large job or allowance income. I wanted to make it go as far as I could, and that meant not letting fees take away my spending money.
What Teens Still Need to Learn
I agree with Kevin that teens need to learn to think about goals, etc. My solution for this would be for their parents to limit how much is in their checking account at one time. Minors can’t have accounts without their parents’ partnership anyway, and it’s an excellent opportunity for parents to shape their kids’ spending habits.
Will most parents do this? I don’t know. I think I got a pretty good set and I know they did their best to teach me financial responsibility. I also know that I was a good saver and very goal-oriented in my teens, so I can’t speak for everyone.
But I think that giving teens a debit card for their checking account is an excellent way to teach them financial responsibility, even if they have to learn through the school of dumb mistakes at first. Better they learn about overdrafting when they’re 15 and not spending money on their rent, food, and other necessities than when they get older.
Why Credit Is More Dangerous
The immediacy of seeing my bank account balance drop brought home how spending affected the money I had. Credit, on the other hand, is precisely the opposite—it’s spending money you don’t have. There’s no good reason for a teen to use a credit card regularly. Rewards aren’t bad, but they’re not necessary for a teen.
At this stage, it’s better to learn that money spent = money you no longer have. Learning about credit cards is good and getting one with your parents to build a controlled credit history may be valuable. But for day-to-day use, there’s much more potential for spending what you don’t have, accruing interest, and generally messing up your financial situation before you’re even out of the gate.
What about you? Did you have a debit or credit card as a teen? Would you give your kid one?