How to Teach Your Teen to Use a Debit Card Responsibly: Avoiding Common Pitfalls
Teenagers nowadays have easy access to their money thanks to the availability of basic checking and savings accounts that come with a free ATM or debit card. However, with this convenience comes responsibility, as nobody but the parents are responsible for teaching their teenager how to handle their finances. The bank won’t do it, and neither will teachers. Therefore, it is essential to educate youth about the risks and common pitfalls of mismanaging a debit/ATM card and how to avoid them.
Mistake 1: Wasting Money on ATM Fees
One of the most common missteps when using a debit card is withdrawing money from an ATM that is not affiliated with the bank. As the average ATM fee in the US is $2.40, using an out-of-network ATM could result in a charge of $4 or more for accessing a mere $20. This amount of fee is an insanely high 20% interest charge for accessing their own money, and it could cost teens hundreds of dollars per year in needless ATM fees if they are not careful.
The lesson: Plan Ahead
It is always better to teach teens to plan ahead and withdraw money only from the bank’s ATMs before they need it. Parents can also use this opportunity to teach the importance of budgeting.
Mistake 2: Overdraft Charges
Most bank accounts allow overdrafts on ATM purchases, charging high fees for the privilege. Teens won’t receive any notice that they are about to go over their balance and face a big fee until it’s too late. Even spending a few dollars over their balance could cost them $35 in overdraft charges.
If teens keep no accurate record of their bank account, they won’t know precisely how much money they have at a given time, leading them to accumulate significant fees and penalties. Overdraft penalties can negatively affect their credit report over time, which can be costly in the long run.
The lesson: Know what’s in your account at all times
Teens have to learn to monitor their bank account regularly to keep accurate records and avoid spending over their balance. Parents can tell their teenagers real-life stories of people who have unknowingly incurred high fees, such as spending $35.99 on a song on iTunes, to illustrate the importance of this lesson.
Related suggestion: The “carry-the-receipt” rule
Teens should also be taught to carry every receipt from their purchases or withdrawals and record them on their checkbook register. Parents can share personal tips such as folding their receipts and tucking them into their wallets so that they cannot miss them when looking for money later.
Problem 3: Physical Danger from Thieves
Aside from managing their finances, parents should also guide their teens in staying safe while using an ATM. Many criminals target people using ATMs as they know they have cash in their hands. To minimize the danger, teens must limit ATM usage to safe environments such as indoor ATMs inside stores or during daylight hours.
The lesson: Use ATMs only in safe situations
Parents can teach their teenagers to use ATM only during the day, if possible, or inside an enclosed vestibule at a bank or inside a store, such as a supermarket, where it is well-lit and populated.
Teaching teens to manage their finances is crucial in preventing them from incurring high fees and penalties that could negatively affect their credit reports and financial future. In this technologically advanced era, opportunities abound for practicing responsible financial management and avoiding common pitfalls of mismanaging a debit/ATM card. Plan ahead, keep accurate records, and stay safe by following these simple lessons.