Learning to save your pennies is an important part of any childhood. However, if recent trends are anything to go by, the days of change clinking in the bottom of piggy banks may be on the way out. More and more banks and companies are creating debit and credit card services specifically tailored to the needs of children and teenagers. More and more countries begin to overwhelmingly prefer cashless payments. Being young no longer looks a reason to miss out on society’s increasing use of cashless payment options.
The switch to cashless spending and saving for children might still set alarm bells ringing for many parents. Stories in the news highlight the costly financial blunders on the part of children who gain access to their parent’s debit cards. They can rack up considerable expenses through online spending, most commonly on video games. These stories highlight the risks of providing a child with unrestricted access to cashless spending. Yet banks and card companies are making moves to counter children’s unrestrained spending with carefully designed and developed accounts.
There are now a number of debit and credit card solutions, as well as pre-paid cards and virtual accounts. These give parents the ability to strike the right balance between encouraging healthy financial behaviours and independence in their children. All while keeping a respectful and safe rein over purchases and spending.
A Learning Experience: teaching your child about finances
One of the main reasons to provide a child with their own bank account or debit card is to encourage healthy financial habits. These are formed through the learning experiences that come with money management. Recent studies show that healthy habits start at a young age, even as young as . Giving financial freedom to a child may turn out to be the right decision.
Providing your children with the freedom to cultivate financial responsibility doesn’t however have to entail a loss of financial oversight. Banks and financial platform developers are continually working at novel ways of balancing minors’ financial freedom with financial security. The online world has significantly changed the way we save, interact with, and spend our money. There are multiple new solutions at work to adapt this wide financial world and cater to the needs of children.
Debit and Credit: traditional financial options for kids
As Liz Weston, personal finance expert at NerdWallet writes, your child will eventually start using payment cards. Thus, starting them early is like ‘providing them with training wheels for learning how financial transactions work.’ Alongside this early training, adding children to credit cards from an early age can help them build up a strong credit score even with minimal interaction with the finances themselves. This gives your child an unparalleled head-start for their financial future if they come round to applying for a mortgage or loan in early adulthood.
Of course, giving a child access to a debit or credit account isn’t sure to come without its complications. Being on equal financial footing as the parent could result in children indulging in undiscussed and financially unsound spending. To resolve these issues, the ideal account would relegate the child’s finances to a smaller partition under the control of the parents. Also, spending would be attuned to the heightened risks of easy but large unintended expenses.
Online Banking and Online Spending: the good and the bad
One inherent feature of access to cashless finances is the ability to spend it on the world’s largest cashless platform, the internet. Internet spending can be tricky enough to navigate for adults. This is especially true with the proliferation of direct debit subscriptions and hidden fees and charges in recent years. Just as adults might lose track of their outgoing transactions or overrun service trails, a child is even more susceptible to these stacking expenses. On top of financial issues, the internet also offers unrestrained access to services that though welcome to adults, may well be unsuitable for minors.
Fortunately many banks, and especially prepaid banking options for children offer measures to counter these issues. These balance the internet’s unrestrained freedom with safety nets. Many accounts for children can now block purchases on items and services unsuitable for minors. The pre-paid options ensure that a subscription payments will not allow balances to run into the negatives. Innovative options for children’s accounts GoHenry©, provide a suite of internet banking features. These features allow parents to view live statements and track their children’s spending from their mobile phones. So whilst spending no longer requires a visible pocketful of change, or a trip to the shops, the signs and consequences of spending can still be responsibly tracked.
Prepaid Cards: an innovative new approach to children’s finances
The pre-paid card sector is currently flourishing. Award winning services like GoHenry© and Famzoo© are designed around both financial and educational goals. As pre-paid cards built around dedicated apps, both options deliver easy to use safety nets and controls for parents. These apps provide younger users with clear saving and giving goals.
Other nifty features of these accounts include the ability to create automated allowances. These are alongside visible rewards for chores and jobs, as well as the potential for penalties that are controlled by the parent. Shifting the financial control from the bank to the parent creates a secure and engaging way for children to learn about financial responsibility in a safe context. These services do come at a small subscription cost after a month trial period, but that cost might well be worth it for the visibility and control over children’s finances that these services provide over traditional debit and credit cards.
The wide variety of concerns created by the combination of a debit account and the wide world of the internet might lead a parent to disregard the idea of creating a bank account for their child altogether. To deny a child this learning experience might however prove damaging. Merely offsetting the child’s possible financial mistakes into the future. Traditional bank accounts might seem too much for a child. The options and opportunities created by pre-paid cards put the parent in control as banker. They also enable financial learning experiences and monitored experiments more accessible to children than ever before. Thereby helping build and nurture healthy financial habits, and a healthy credit score, ready for whatever the future might bring.