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Ask Dave

Pre-paid debit for kids?

Keith asks Dave's opinion of pre-paid debit cards for kids. Dave isn't a huge fan, and he suggests teaching children to handle money responsibly from a young age is a better approach.

QUESTION: Keith has seen several companies marketing prepaid debit cards for kids. They are being positioned as a way parents can set spending limits for their children, but Keith thinks it promotes reliance on cards. Dave agrees, and explains a better way for parents to teach their kids about money.

ANSWER: I agree with you. I don’t recommend prepaid debit cards for children, except in very unusual situations. Let’s say your kid was going on a trip and you wanted them to have something in their pocket for limited access to cash. But if they’re old enough and responsible enough, I’d rather them have a traditional debit card attached to their own account.

I want parents to teach their children how to work, give, save and spend wisely. It’s all about teaching your children to become good adults, and handling money is part of the equation. How does that apply to something like a prepaid debit card for a kid? For the child, they’re looking at it as if mom and dad are an ATM. They don’t equate it with real money unless they put their cash into the card.

I suggest, and we did this with our kids, helping them open a checking account with a debit card attached around age 15 or 16, provided you have taught them — and they have demonstrated — wise money management practices up to that point. Teach them to reconcile and balance the account, and walk with them when they do this so they don’t slip into the idea a debit card is some magical portal to free money.