Banking: Effie Zahos

Having their own debit card will teach kids how to handle money

Finance expert and author of The Great $20 Adventure, Money’s

editor Effie Zahos, appears regularly on TV and radio. She started her career in banking.

How do you feel about your nine-year-old having their own debit card? In the past they had to be around 16 to be eligible but now one major bank has dropped that down to just nine years. The Commonwealth has a debit Mastercard for children aged nine and over to assist parents in teaching their young family about responsible spending in the digital age. Surprised? I personally think it’s about time!

The good thing about debit cards is that they only allow you to use the funds in your bank account. And because they are run on either the Mastercard or Visa payment system, your child can use their card online, in stores and overseas. Transactions are protected by the Mastercard or Visa security features.

In our digital age chances are your child’s first purchase will be online. My son’s certainly was. At six he downloaded a gaming app using my credit card. The money lesson he learnt then was zilch, though I did ask him to pay me back in cash so he understood downloading wasn’t always free.

Now I’m not suggesting that your child puts their life savings in an account linked to a debit card but I am suggesting that without digital money their financial skills won’t grow.

Giving kids the tools to save and understand how money works is really important. The latest World Payments Report released by Capgemini and BNP Paribas shows Australia is now fourth in global standings for non-cash transactions per capita, behind the US, South Korea and Denmark. Reserve Bank data also supports the fact that we’re not going back to cash. In 2016 only 37% of transactions were in cash, down from 62% six years earlier.

Mario Hasanakos, co-founder of Spriggy, an app launched in 2015 that offers prepaid debit cards to eight– to 18-year-olds, says giving kids a piggy bank and some pocket money just isn’t enough any more.

“Kids are growing up in a world where there may not be any cash transactions left by the time they’re adults,” he says. “It’s so tremendously important that we give them the early experiences of responsibility they’ll need to make smart financial decisions in that digital currency world.”

According to Canstar’s database, 32 out of the 47 junior/ youth accounts that it researches had debit card access (compared with 40 that have ATM access via a keycard). While debit Mastercard and Visa cards aren’t new, what is new is the trend for tweens to have access to them.

As Hasanakos points out, the trap with digital money is that it becomes less tangible and it’s much easier to spend thoughtlessly. “This can wreak havoc on our budgets and over time get us into financial holes that are tough to work out of.”

That’s where parents need to be vigilant that the app or account your child uses has the necessary features to help them save and spend wisely.