Should children have a debit card?

Debit cards are an essential part of life in a country like Canada that’s rapidly becoming a cashless society. But even as adults ditch loonies and toonies and opt for debit cards and credit cards, most children don’t have access to the world of online banking.

For some parents and guardians, this problem is easy to solve. Simply give a child a debit card and they, too, can pay for goods and services around Canada with a tap or swipe of a card. But for many others, the idea of trusting a child with a debit card isn’t as simple as it might seem.

This raises the question: Should children have a debit card?

There are many excellent reasons why children should have debit cards, especially if you want to teach your child good money habits. However, there are potential drawbacks to giving a child some financial freedom, too.

In this article, we’ll explore whether giving a child a chequing account and a debit card is a good idea. We’ll discuss the pros and cons of bank cards for kids and clue you into what you should know before you open an account.

Can I Get a Debit Card for My Child in Canada?

The short answer? Yes, you can get a debit card for your child in Canada.

There aren’t any laws or regulations stopping Canadian children from getting bank accounts. The Financial Consumer Agency of Canada encourages parents and guardians to educate kids about debit cards and banks as early as possible so that the next generation of Canadians can be financially savvy.

But getting a debit card for a child in Canada can be a bit more complicated than getting one for yourself.

Many banks only offer chequing accounts and debit cards to customers that are the age of majority in their province or territory (usually 18 or 19). We here at KOHO currently require all new account holders to be at least the age of majority in their region before signing up.

That said, there are banks and credit unions that can work with younger account holders—the trick is finding the right option for your child’s needs.

Some banks only allow you to add a child to a joint banking account. When you add a child to your account, any money they spend on their debit card comes out of your bank balance.

Other banks let you set up a custodial chequing account (often called a youth bank account). Youth bank accounts let your child manage their own money under your supervision.

With a youth bank account, your kid can get direct debits for paycheques from any jobs that they might have and a nifty debit card for their purchases. Most of these accounts also automatically convert to adult chequing accounts once your child reaches the age of majority so they can keep up their good banking habits for life.

Pros & Cons of Debit Cards for Children

Giving a child a debit card comes with a whole slew of potential advantages and disadvantages. Although debit cards can provide kids with an excellent chance to become more independent and to learn essential money management skills, they’re not without their risks. Here are some key things to keep in mind before helping your child get their first debit card.

Advantages of Giving a Child a Debit Card

Debit cards are powerful financial tools and they can provide children and teens with a range of benefits, including:

Increased Feelings of Independence – One of the biggest advantages of giving your child a debit card is the increased feelings of independence that come with having control over one’s own spending. Although it’s up to parents and guardians to decide when their children are ready for extra independence and responsibility, a little bit of personal freedom can help provide kids with a confidence boost that can serve them well in the long term.

Opportunities to Learn About Managing Money – For many kids, a debit card is one of the easiest ways to learn about managing money. Since we’re moving quickly toward being a cashless society, children need to learn more about how to navigate the world of online banking. A debit card can kick-start their financial journey and help them learn more about planning and sticking to a budget.

Can’t Negatively Impact Their Credit Score – Unlike a credit card, debit cards generally have no impact on your child’s credit score. So, if your kid struggles a bit with managing their budget at first and accidentally overdrafts their account, they won’t hurt their credit score. That said, unpaid overdraft charges can get sent to collections, so ensure that you either opt-out of overdraft or carefully monitor your child’s account to prevent any issues down the line.

Easy Access to Account Monitoring Tools – When your child has a debit card, it’s easier for you to keep tabs on what they’re spending their money on than if they purchased everything with cash. Of course, some kids might not like having their parents or guardians monitoring their every purchase. To help your child still feel independent— even while you monitor their account—you could set aside time each month to review their bank statement. This is a great opportunity to help them consider what they purchased and why so they can improve their budgeting skills.

Disadvantages of Giving a Child a Debit Card

Even though debit cards come jam-packed with benefits for children, there are disadvantages to having them, too. These are some of the most important drawbacks of getting your child a debit card to keep in mind:

Potential For Overdrafts & Overspending – Although most youth bank accounts offer protections against overdrafts and overspending, there’s always a risk of your child going a little overboard with their debit card spending. That’s why it’s important to introduce the idea of budgeting and managing one’s spending before your child gets their first debit card.

Another Account to Manage – Getting a debit card is an exciting milestone for a young person, but it can come with extra headaches for the parents or guardians in that child’s life. Since most youth bank accounts are custodial accounts, a child’s parents or guardians will ultimately be responsible for managing and dealing with any issues with their account.

Doesn’t Help Build Credit – A debit card is a great way to introduce online banking to your child without the risk of hurting their credit score. However, while you normally can’t hurt a child’s credit score with a debit card, you can’t help build it either. Alternatively, adding your child as an authorized user on your credit card can help them kick-start their credit score, but it comes with a whole host of risks that you don’t get with a trusty debit card.

How to Help Your Child Get Their First Debit Card

Think your child could benefit from a foray into the world of online banking? Here’s everything you need to know to help get your kid their very first debit card.

Step 1: Ensure Your Child is Ready for a Debit Card

The first step in getting your child a debit card is to determine whether they’re actually ready to start managing money.

Before you open a chequing account for your child, sit down with them and discuss what having a debit card actually entails.

Take the opportunity to discuss the basics of money management with your kid and see whether or not they're ready to take on that extra responsibility of handling their own purchases. You can also give them a chance to ask questions about how debit cards work and what they’ll need to do to keep on top of their spending.

Step 2: Consider Your Debit Card Options

If you’ve determined that your child is ready for a debit card, it’s time to start considering their options.

Nowadays, kids have plenty of debit cards to choose from. Some banks allow young children to set up their own youth bank account with a parent or guardian as a custodian. These bank accounts often come with kid-friendly money management tools as well as parental controls to make it easier for you to oversee your child’s spending.

Alternatively, if you have a child that may not be quite ready to handle a full-fledged chequing account, you could get them a prepaid debit card.

Prepaid and traditional debit cards operate the same way when it comes to paying for goods and services. But prepaid cards provide parents and guardians with additional control over their child’s spending.

With a prepaid card, your child doesn’t actually have a bank account. Rather, you’ll load money onto your kid’s debit card from your bank account as needed.

The benefit of this is that there’s no way for your child to overdraft on a prepaid card and your kid won’t need to worry about keeping enough money in their chequing account. Many companies even offer special apps that let you load money onto your kid’s prepaid card whenever they complete chores or other household tasks.

Whether or not you choose a traditional or a prepaid debit card, be sure to double-check any fees before you sign up. Fees for youth bank accounts tend to be fairly low, but some prepaid debit cards have lots of hidden costs.

Step 3: Open a Chequing Account

As soon as you decide what kind of debit card is right for your child, you can help them open their very first bank account.

When you get a debit card for your child, you may be able to open an account online or in a physical branch. Although many banks are now transitioning toward offering online-only services, it can be helpful for a child to visit a physical branch so they have an idea of how in-person banking works, too.

Regardless of whether you open your child’s account online or in-person, take some time to walk your child through the ins and outs of their online banking dashboard. Even though most kids are tech-savvy, it helps to give them a quick walk-through of what a bank statement looks like and how they can deposit money into their account before they start using their debit card.

Should Children Have a Debit Card?

There are no laws in Canada stopping children from having a debit card. So the decision as to whether your kids should be able to open a chequing account and manage their own money is yours to make.

Getting a child a debit card can do wonders for their sense of independence, confidence, and money management skills. But managing your child’s spending is a task unto itself. The key is to ensure that your kid is ready to budget responsibly before you help them get their first debit card.