Becoming Financially Independent of Parents with Debit Cards

July 19th, 2007 | Stacey | Financial Freedom, Financial Independence

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Because consumer debt in the United States is rapidly approaching one trillion dollars, more parents than ever want to educate their teens about the value of a dollar. The Better Business Bureau has suggestions about how to help teens in their journey toward education – financial independence – and a better future.Setting up a checking and savings account for your teen will help them to learn how to save and how to manager their money. Once teens have the ability to effectively manage and budget “real” money, they are ready to try out handling “plastic money”.

For parents who are hesitant to give their teen a credit card, debit cards are an excellent plastic money option. However, even a debit card can be overdrawn so a teen needs to use caution, as well as parents, when using a debit card. According to a recent study from the Center for Responsible Lending, ATM and debit cards accounted for almost half the overdraft fees levied against customers during 2005.

There are also prepaid cards that are like a store gift card but can be used anywhere a credit card is taken. There is no worry about overdrawn bank accounts and the money is there on the card for the teen to manager. The only cautionary advice is that certain prepaid cards have fees tacked on, so read the fine print about the deal you are getting.

If a parent does opt for a credit card, a secured card that sets up the credit limit based on savings is a viable option. A trustworthy teen may also be added to the parents’ credit card as an authorized user.

Finally, set up guidelines to let your teen know what they can and can’t purchase with the card. Make the teen responsible for paying their own bills on time and resolve their own debts. Discuss the relevancy of budgeting and go over monthly statements together.

Becoming financially independent of parents is a learning process than can be helped with debit cards.