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My son, who recently turned sixteen and got his driver’s license, also just scored his first part-time job. For the first time in his life he will have the responsibility of scheduled work shifts, but will also enjoy a biweekly paycheck. With a steady income, as well as the expenses of gasoline, car maintenance and insurance that come with driving privileges, he will be traveling new ground in financial responsibility. When he came home from the required drug test for his new job he was told that he could have his paycheck direct deposited into a bank account.
My son asked if he could have his own account with a debit card.
After talking it over with my wife, the three of us hopped in the car and went to our bank to set up a teen account. It was exactly what we were looking for as he would be able to manage the account online, and have his own debit card, but Vonnie and I would also be able to see the account through our online bank portal.
I was barely able to get into the van before I opened the cornucopia of information he needed to know about having is own bank account with a debit card.
PIN
During the account setup process, the banker had him select a PIN number. I had him write it down in the folder of introduction material the banker gave him. He cannot forget his PIN number, or he may lose the ability to use his debit card until he gets a new one assigned.
The Security Code
My son buys video games through an online service periodically. Each time we make a purchase, it asks for the security code. I showed him where the three digit number is located on the back. I told him that this proves to the online merchant that you are holding the card in your hand, and that the number wasn’t just obtained through devious means.
Sign The Card
I showed him the space on the back of the card where he needed to sign the card, which I had him do immeidately.
“Why do I need to sign my card?” he asked.
Good question, let’s talk about that.
Debit vs Credit
My son needs to be aware that when he uses his debit card, he may be asked if the card is debit or credit. If he selects debit, he will have to enter his PIN number. If he selects credit he will have to provide his signature which would then be matched with the signature on the back of the card. Having the signature is for his protection, to prevent someone else from forging his name. There isn’t much difference between selecting debit or credit as far as he’s concerned, except for one major thing he should be aware of. If he selects debit, the transaction will likely post immediately to his account. If he selects credit, it could take a day or two before it posts.
“Why do I care if a purchase shows up online right away or not?”
Great question. Let’s explore
Balance Tracking
We got my son signed up with the online banking portal, which he can use to look at the balance and transaction history of his account. The banker also told him about an app he can install on his smart phone. Then she said something that left me in shock.
“You can use the app to quickly tell if you have enough money before you make a purchase. It’s really convenient, because who balances their checking account in a paper register these days when you can just look at the balance online?”
The first thing I did when I got in our van was to tell him to forget she said that. They had not given him a checking account register, but I told him that we would get him one, and I would show him how to use it. I told him the online app is NOT a good way to figure out if you have enough money to make a purchase or not.
For example, let’s say he wrote me a check for his car insurance for the month, and then paid at the pump to put gas in the car (which is always processed as a credit transaction). Neither of those transactions would post for days. If he spent the entire balance stated in the app, he wouldn’t have the funds to cover the gas or his check when those transactions posted. He would overdraft his account and have to pay the consequences.
“How much would an overdraft cost?” he asked.
I knew this was a lot of information at once, but this one was important.
Overdraft Consequences
What happens when an account is overdrafted depends upon the bank. The best case scenario is that the bank “covers” you, but charges you an insufficient funds fee, usually around $30. Worst case scenario is that he gets slapped with the $30 insufficient funds fee, and a check is sent back to the retailer and they hit him with another $30 fee.
“Just make sure you keep track of all your transactions in your register, and keep your balance above zero.” I said.
Fund Availability
I warned my son that when he makes a deposit, that doesn’t mean the money is available right away. Usually a cash deposit will be available immediately, but a check deposit’s availability will depend upon what time of the day he walks into the bank, and how large the deposit is. If the deposit is made after 2pm at our bank, it won’t be available until the next business day. If the deposit is large (usually over $1000), the full amount will not be available for several business days. Bank tellers normally mention this, but I told him to get in the habit of asking when the funds would be available.
Once I got started, I was surprised at how many topics we had to cover. I’m excited for our son’s future, and this opportunity for him to learn and practice using financial tools while he’s still under our guidance. I’m sure not all of this sunk in, as it was a lot of information. But I look forward to going over it again and having him take the next step in learning how to handle his finances successfully.
Have you taught your child about finances through the use of a debit card? Or do you remember when you got your first debit card?
ha well when I was a teen you had to walk into the bank and fill out one of those slips to get money from the teller. Ah the old days. I think there is WAY more accessibly these days which must be scary as a parent. I guess “the talk” doesn’t just include the sex talk anymore. 🙂 Congrats to him on the job!
LOL, that’s exactly what I was thinking as we were talking. Keep your money protected at all times…..
We have discussed the debit card with our 3 children. They understand the different between a debit and a card card. We are right behind you in terms of first jobs and debit cards. I don’t remember my first debit card, but remember a friend depositing a check via an ATM and I was amazed. You mean you don’t have to take it to a teller?
I got my first debit card after I graduated from college and had to learn on my own how it worked. It wasn’t difficult…it was just another thing to figure out. But if I can help him along the process, I will!
Your son is very lucky! Your reference to overdraft brought back very bad memories the very bad habit I had in my teens and early 20s of getting into overdraft every month. Ugh! So smart to spell it out right from the get-go. These things are not intuitive for everyone.
The discussion on overdrafts continued and I talked about how those charges rack up quickly……it can spiral your finances into the toilet awfully quickly. I like the fact that we can monitor it online too….helps to keep tabs on him! Thanks for reading, Prudence!
I got my first card when I went to college. It was a bit of an adjustment, but I didn’t find it all that confusing. I guess when you put it all out there as a lesson, though, it’s pretty complex.
As someone that also got my first debit card in college, I think it was an easier adjustment at that age because we had already been exposed to some of these concepts. He’s coming from a place of zero experience….it seemed a little overwhelming to him I think, but he’ll get there. 🙂
That’s awesome that he has a job and is taking responsibility for his finances. That is lots of information. I’m pretty sure they didn’t have debit cards when I opened my first bank account in high school. I think I got my first one in college but don’t remember much about it. My parents never taught me about money. It’s great you are giving him that education while he is still at home.
I know they didn’t have debit cards when I was in high school…I had to physically go into the bank, or go through the drive through to get some cash. They are very convenient, but it’s important to learn how to use them correctly. Thanks for reading, Kim!
Kid, all I can say is cash is king. Nothing puts the brakes on spending than watching a pile of twenties disappear. Really mess up your dad and pay him his monthly fee for the use of the car in cash :-). No checks, no overdraft worries, no apps.
That’s good advice, Slackerjo…and I hope he does continue to use cash whenever he can. Although it will be convenient for him to be able to buy his games online on his own….maybe too convenient! 🙂
Great explanation of everything. It was a lot of information and hopefully he digested it all. If not, no worries as hopefully one overdraft charge will be enough to “wake him up”!
I hope him to avoid even a single overdraft, Jon! 🙂 Thanks for your comment!
My kids are only 3 and 5 so we haven’t ventured into this territory yet. I definitely plan to let my kids have a credit card though- I want them to learn what things cost and what the consequences are when you mess up!
While we were doing the paperwork for the checking account and debit card, the banker did mention a credit card……My mind instantly toggled between “No freaking way,” and “maybe if we helped teach him the right way to use them,” about 100 million times in .5 seconds.
Then she said that he would have to be 18 to have one….so we have a few years before we need to deal with that. 🙂
Firstly I would like to say Too lucky your son is! And at the same time, you have greatly explained everything in detail. I was a college goer when I first got my first card. And it did not seem that much complicated at that time as I was already aware of card related facts.
Thanks, Andrew! I think the reason it seems complicated is this is his first exposure to any of this….my first debit card came when I was in college, but since I had already dealt with bank accounts and managing money a little bit not everything was new. Thanks for sharing your thoughts!
Way to go! We use and love the FamZoo card with our kids because I’m not comfortable using true debit cards online since they don’t offer the same protection as a credit card. For people who don’t have a good option at their own bank for kids to use (or even if you do), the FamZoo card is pretty cool because it allows you to help the kids to budget their money from within the site.
In any case, you are right, allowing a kid to have a debit card opens up a whole new world of discussion and responsibility. Much better kids learn it while they are home where parents can answer the questions than when they are out on their own and following the bank employees advice of not needing to balance their checkbook! Yikes! Thank goodness for conscientious parenting!
I’ve never heard of FamZoo, Tracie….but from what you’ve mentioned, it sounds like something worth checking out. Thanks for the pointer!
Buying gas is not always processed as credit. And nowadays, even if it IS credit, that amount IS still held in your account. In fact, many gas stations place a hold larger than the purchase amount when you pay credit at the pump. Many will also charge more per gallon when you pay with credit.
Unless you’re writing checks or have anything set up as an auto-pay (please don’t use your debit card for that, it’s like cash in that your bank can’t just cancel it or stop payment like they can an direct ach debit from your account, you might have to get a whole new card!), your available balance as shown online is up to the minute with most banks. I work at a small community bank and if you ONLY use your card or withdraw cash in person at an ATM or in-branch, you will ALWAYS see your exact available balance when you look online, check your app, or text for a balance update.
It’s true that buying gas is not always processed as credit…..and I know I’ve also seen the “preauthorization” sort of transaction. But I’ve also seen where it doesn’t show up in my account for 2 business days. Case in point, I put gas in my van last Friday – still no sign of it in my account. It usually hits Monday night…I’m 100% sure it will have posted by the time I get up tomorrow. 🙂