Money: Learning to Manage Finances

By Michele Blandino

Children entering their teenage years have many important lessons waiting to be learned. There is the transition to high school, preparing to earn their driver's license, and perhaps the most important lesson of all: learning how to manage money.

If it seems as though today's teenagers have more money than those of a generation ago, it's because they probably do. Between well paying part-time jobs and well meaning relatives, kids today seem to have no shortage of pocket money. And with so much discretionary income at their disposal, they freely spend it on whatever suits them: clothes, movies, food, and even expensive electronics rather than saving for a future need such as the purchase of a car, auto insurance or even college.

Placing Limits

In an effort to control their kids' spending and encourage at least some savings, many parents are turning to debit cards. As you probably know, a debit card looks like a regular credit card, but is secured by a cash balance in a bank account. Purchases can be made up to the amount available in the account. Since a minor cannot open an account without the co-signature of an adult, parents can use monthly statements or Internet tools to monitor their child's spending. In addition, some banks will send parents an e-mail each time the card is used to let them know when and where their children are spending money.

The Benefits

There are many benefits to giving your teenager a debit card. First, it provides the opportunity to learn the importance of keeping track of purchases. Remember, purchases can only be made with a debit card up to the amount in the account it is connected with. As a result, it will be necessary for your child to deduct each purchase they make from the account's balance so that they have an idea of how much they have to spend. Learning to keep track of their purchases and wisely manage their money is a lesson that teens will carry with them into their adult years - getting an early start will help get them off on the right foot.

A debit card also provides a measure of security. Rather than carrying large amounts of cash which can be lost or misplaced, your child can use their debit card to make their purchases.

Using the Card Wisely

If you choose to give your teenager a debit card, care should be taken to explain precisely how the card works. Let them know that the account is not a "bottomless pit" but rather one with a finite limit. If your child has access to a significant amount of money, limit the balance in the debit card account to a specific amount and allow it to be replenished only at set intervals such as monthly or quarterly. Not only will this keep your teenager from reckless spending, it will teach them how to budget their purchases.

To Learn More

Most banks offer debit cards as an option for checking and savings accounts. There may be fees for using the card as well as minimum balance requirements, so be sure to ask.