Give your child a debit card to help them learn about budgeting and money management.
CNBC and Fed report that consumer debt has risen to $14 trillion in the US. Any step you take to promote financial literacy can be very beneficial.
Not all debit cards are the same.
Some charge higher monthly fees. Some cards are free, but charge for ATM withdrawals and card reloads. Some cards have features that are above and beyond those of the competition.
Understanding your options is important, especially in terms of cost. Below, we’ve compiled a list with some of the best options for debit cards, including two free options that you might want to consider.
Table of Contents
How Debit Cards Teach Children About Money
What is a Kid Debit Card?
Children’s Prepaid Cards: The Best 6 Available
The Pros and Cons to Getting Your Child a Debit card
How to choose a debit card for your child
The Best Kids Debit Cards
How Debit Cards Teach Children About Money
Kids can learn a lot about money by using a debit or credit card. Budgeting is the most important skill they’ll learn.
You can give them the freedom to choose how to spend money by giving them a set amount.
They have to decide whether it’s worth buying a toy or a candy bar, and not just say they’ll buy one at the store. The opportunity cost is a much bigger factor.
Using plastic instead of cash has some benefits, in my opinion. You can think of it as a training wheel before you get your first credit card.
You can limit how much your children can spend with a debit card. You can make it virtually impossible for your child to spend too much, and you might even see them start to understand the boundaries.
When they receive their first credit card you can remove the training wheels. I believe they will have a better chance of not exceeding the limit because they are used to sticking to a set budget.
Teaching someone about money at an early age would be step 0 in Dave Ramsey’s Baby Steps. He’d likely frown on the credit card training…
I digress. Giving your child a debit card, and having a conversation about money with them will at least help to promote financial literacy. This will hopefully help them avoid contributing to the multi-trillion dollar consumer debt mentioned above.
What is a Kid Debit Card?
Before I get into my list of best kids’ cards, let me define what a debit card for children is to myself. In general, I believe it must adhere to three rules:
The card must be used by a child (under 18 years old).
Card must be accepted by most retailers, including online
Spending controls and parental control are required, as well as the transfer of preset amounts from a checking to the card.
You can also track your spending, manage chores and monitor your budget.
The best debit cards for children are usually prepaid cards, which you can load with money. As they are prepaid cards, there is no need to open an account or risk overdrawing your account. In the above example, the “prepaid” card is the training wheel.
Children’s Prepaid Cards: The Best 6 Available
The first two options on the list are absolutely free! There is no charge for them.
There are other options that may be better and even more beneficial, but they will come with a monthly charge.
- Akimbo Prepaid Mastercard
Monthly Fee: $0
Card Purchase Fees: $0 (First Subscription Card Free, thereafter $4.95).
Reload Fee $5.95
ATM Fee: $1.98
Technically, the Akimbo pre-paid debit card is free. Although there is no annual or monthly fee, there are a number of additional costs.
In addition to the $5.95 cash reload, you will also be charged a $4.95 replacement card fee and $5.95 for inactivity (if your card has been unused for a period of 12 months).
The card is free and it’s easy to create sub cards for kids. It only costs $4.95 once. The other costs associated with the card can add up quickly (especially the transfer fee).
Find out more about the Akimbo pre-paid MasterCard here.
- Movo Digital Prepaid Visa Card
Monthly Fee: $0
Card Purchase Fee: $0.
Reload fee: $0 in most cases
ATM Fee: $2.00
In a few key ways, the Movo card is superior to Akimbo’s free debit card.
There is no reloading fee when you use direct deposit, or any other method that is approved. This is a huge advantage over the Akimbo Card. Imagine paying $5.95 to reload $20 on a card that is used for a child’s allowance. This is over a 25 percent fee!
Akimbo will still take 6% even if you only load $100 at a go.
Movo is free. This is an advantage for those who plan to add small amounts of money on the card often.
There is however a $4.95 fee for inactivity that comes into effect after just 90 days, compared to the 12 months of Akimbo. Movo may charge you if your child is good at saving and does not use the card very often. You’ll also have to be aware of ATM fees, just like with many other cards.
Find out more about Movo Virtual Visa Prepaid Card here.
- Current Visa Debit Card
Monthly Fee: $3 (36 dollars billed annually).
Card Purchase Fee: $0.
Reload Fee: $0
ATM Fee: $0
Current is not free but offers transparent pricing as well as a free one-month trial. You can add money to the card as often as you like for only $36 per month.
Current is more than a simple debit card. The mobile app offers a suite of products including teen banking. This is one of the more technologically advanced options on our list.
The card is also stylish and cool.
Find out more about the Current Visa Debit Card.
- FamZoo Reloadable Mastercard Prepaid Card
Monthly Fee: $5.99
Card purchase fee: first four cards are free; then $3 each.
Reload fee: free when you use a direct deposit or bank transfer.
ATM Fees: They vary by ATM
FamZoo is the most popular option for kids’ debit cards on this list. It’s because the FamZoo card was specifically designed as a kids’ debit card. Other options on this list are simply prepaid debit cards which happen to work well for children.
The card was designed with kids in mind, and it has a number of cool features.
Set up payment for chores
Tracking and monitoring children’s spending
You can set goals to save for your children.
Monthly fee is $5.99 for each family. The value increases as more children use the card. There are also ways to reload the card for free, which will help you keep costs low.
Find out more about FamZoo’s prepaid debit cards here.
- Gohenry Prepaid MasterCard
Monthly Fee: $3.99
Card Purchase Fee: $0.
Reload fee: $0
ATM Fee: $1.50
Gohenry provides a 30-day free trial. It is then one of the most expensive cards in the list at $3.99 per child per month.
The price premium could be justified depending on the features you want in a child’s debit card. Gohenry, similar to FamZoo and offering a sleek, money-educational app, is designed specifically for children.
The ability to customize the card could be a nice addition and help your child become more interested in learning about money. A customized card costs $4.95.
Find out more about the Gohenry Card here.
- Greenlight Kids Debit card
Monthly Fee: $4.99
Card Purchase Fee: $0.
Reload Fee: $0
ATM Fee: $0
Greenlight is another card for children.
Their tagline is, “the debit card managed by parents for kids.”
It is priced similarly to FamZoo. You pay $4.99 a month, but you can add multiple children on your account. The app also has a number of great features that encourage kids to be responsible with their finances, such as:
Chore Management
Allowances
Real-time Transaction Notifications
Interest paid by parents on savings
More…
Find out more about Greenlight cards here.
Bonus: Open a joint checking account
This list offers a bonus: a regular debit card (non prepaid).
This can be done by opening a joint account with your child, giving them both a FDIC-insured account and a debit card.
Two things to watch out for with this option:
Overdraft fees can be costly.
Check the age minimum to open a bank account. This can vary from one bank to another.
This is a good option if you can overcome those two obstacles. It’s also free. Checking accounts and debit cards are usually free. You also don’t need to worry about “reloading” fees.
The Pros and Cons to Getting Your Child a Debit card
Kids Debit Card Pros
Teaching Kids to Budget As we mentioned in the introduction to this article, giving your child a debit card is a great way to help them learn about budgeting.
You can set spending amounts: With most prepaid cards, the parent is in control to set limits on the card and monitor the account. You can let your children spend their money without letting them go completely.
Avoid Overdraft Charges: By using a prepaid debit card, you can eliminate the risk that your child will overdraw a debit card. This could result in hefty charges.
Many other features: These cards come with a variety of useful extras. From setting up interest rates to encourage savings, to rewarding children for chores done, they all have additional features.
Kids Debit Card Cons
Kids’ debit cards can be expensive. Whether it is a monthly charge, reload fees, ATM withdrawals fees, or other types of fees, there’s no way around it. You can avoid overdraft fees by paying a high fee. In some cases, you may also get fun features that help you manage your card and teach you and your child about money.
Most debit cards don’t offer rewards or cashback.
Age Limits. The age limit for opening a credit card varies from company to company. It is important to check this before you purchase a credit card.
How to choose a debit card for your child
Once you understand your options, choosing a debit card is simple.
To make a decision, you need to answer three general questions.
- Do you want a prepaid card?
You have narrowed down your choices to the six prepaid cards above if you are looking for the security and safety that comes from loading money on a prepaid credit card.
You might prefer a traditional debit card if you’re willing to take the risk of an overdraft or you know a bank which prevents overdrafts.
- Would you like to add features?
You should choose a card that has many bells, whistles and features, such as the FamZoo card, Greenlight card, gohenry or something similar.
The website of each card explains exactly what they can and cannot do (e.g., monitor spending). It’s important to carefully read the details before signing up.
- How often will you reload the card?
You’ll need to pay special attention to the fees and the methods of reloading the card if you plan on reloading the card every month or even weekly.
You will want to lower the monthly charge if you plan to only use the card once per year.
The Best Kids Debit Cards
A debit card can help your child learn about budgeting and money.
You can manage your money digitally instead of giving out cash allowances, as you do when paying for credit cards and monthly bills.
When choosing a credit card, it is important to ensure that the benefits of the card outweigh its costs. These cards aren’t cheap and their monthly fees and costs can quickly add up!
This article was originally published on Wealth of Geeks. It has been republished by permission.
