According to the Federal Reserve, 77 percent of American households have some type of debt, such as student loans, mortgages, or unpaid credit card bills. Although it is often normalized in today's society, credit card debt is reaching an all-time high, and it’s more important than ever for young people to learn financial literacy before the money they’re spending turns into a regretted decision. The solution? A 3” by 2” card. When parents grant the responsibility of a debit card to their high school students, they also give them lessons in financial responsibility that will help them to save money in their adult life.
A debit card is good practice for adult life and decisions. Commonly confused, debit and credit cards have key differences. The main difference is that a debit is linked directly to a bank account, meaning that when a purchase is made, the amount is automatically deducted from a bank account. However, a credit card is used on the trust that the purchaser will pay the bank back at the end of the month, hence the name “credit card.”
82 percent of adults have a credit card, which means that they need to keep track of their expenses to avoid overspending. Having a debit card from a younger age teaches this valuable skill by having a cap on the amount of money a person can spend. Eventually, when they get a credit card, they will be better equipped to manage their spending and avoid accumulating the debt that so many American families have acquired. “I hope to (one day) get that self-confidence to be more comfortable with my purchases and having a debit card is (helping) me get there,” said Berkeley High School (BHS) sophomore Violet Potts.
While granting teens access to a debit card offers them a chance to manage their own finances, it also enables parents to monitor the amount of money in their child’s balance and add more funds. “Sometimes it does get annoying when I have to request money because I don’t have enough for lunch or something,” Potts said. While this supervision can feel limiting at times, it is an opportunity to teach teens about budgets. It also fosters open conversations between parents and children about spending behaviors. In addition, with BHS being an open campus, many students frequent popular downtown lunch spots. According to the Wall Street Journal, $68 million in cash is lost or thrown away each year. A student who carries only cash can easily lose it or have it stolen, making it impossible to replace. In contrast, a lost card can be recovered by ordering a new one through the mail ensuring that no money is truly lost.
However, a debit card is a financial privilege that some families do not have access to. According to the CA Department of Education, 23.8 percent of BHS students are at a socioeconomic disadvantage. For individuals without citizenship or a permanent home, it is nearly impossible to open a bank account, as many banks require these, making it difficult to obtain a debit card.
Altogether, debit cards grant financial freedom, literacy, and responsible decision-making to those who have access to them. By having more independence over their spending, teens will be better prepared to one day reverse today's record personal debt.