Surprise! Your child might buy your Christmas present with his or her very own debit card – funded by you, of course.

Debit cards for kids – from as young as three to late teenager – are still a relatively new concept, less than a decade old. The growth in this segment of the plastic money business is huge, exponentially so, generating interest from numerous web applications, serious funding from venture capitalists, investors, mainstream financial institutions, non-traditional finance mobile challenger organisations and many more web-based industries.

And why not, the message of promoting money management with children and their parents involved is almost self-fulfilling growth.

We know factually that financial literacy across the globe (see PISA) is still nowhere at a level that it should be for our modern financial activity. Consider bitcoin where you can buy 0.5 bitcoins, 0.02 bitcoins, or even 0.00000001 bitcoin, if it suits your budget.

So people, are you up on those eight decimal points past zero?

So, let’s explore the industry promotion features for youngsters and parents/adults.

The children

• Can learn to save, spend, invest, and give by becoming money savvy in managing the allure of online spending, purchasing in physical stores, and further, realising that money is not infinite.

• Opening an account, depending on where and with whom, offers numerous incentives to both child and parent and of course, new clients growth advantage to the business!

• A free gift when opening the account

• Account will pay a bit of interest

• Children can take quizzes

• Earn points and badges

• Account cashback rewards can be translated into investing in fractional shares or exchange-traded funds

• Everyone gains money skills for life

The parents

Their interests may converge or diverge with their children’s money management.

• Easier account opening than the very old passbook savings

• Allowance transfers can happen even automatically from the parents’ account with same financial institution

• Physically-remoteness due to Covid isolation, these apps have become fantastically convenient and increasing in popularity

• Build financial awareness in adults as well

• The child is introduced to many financial literacy concepts through various debit card company apps, thereby increasing financial comfort faster than ordinary literal learning. Money in action, so to speak, rather than – if you hate maths – vague concepts in a scholastic primer.

• However, parents will be incentivised to keep up!

• Empower automatic allowance management

• Keep kids secure with spending activity monitors

• Parents can define spending habits with specific uses, brands, kinds of acquisitions and how much can be spent and limits

• Delineating needs versus wants

• Fostering goal setting and impetus to understand, earn and attain a goal

• Allows monitoring types of activities with lock-ups if good financial practices are not followed by child

• Safeguards include some insurance protection against loss, unauthorised usage whereas physical cash if lost, stolen if it happens, the money is just gone

The concerns

• Concerns about children and adult identity theft

• Risk of personal information exploitation from sale of data to indiscriminate third parties

• Promoting addiction to online interactions with unknown persons

• Even less physical, personal communication in the family.

• Cost per month for parents can be relatively inexpensive depending upon the jurisdiction, the basics, generally, less than a couple of cups of mochaccino per month.

Thoughts for or against this concept

Initial awareness of digital cash was perpetuated with the use of smart phones.

Traditional methods of helping children manage money with a savings account (of some sort) was cumbersome – meaning cash had to be deposited and withdrawn physically, accounts were not always available or accessible in every financial institution, pocket money got lost or stolen.

Debit cards for children represent an entirely new way to enter the financial world while some countries have embraced digital cash for years, for example, Sweden society is almost cashless.

The upshot: kids from a young age to adulthood can learn spend, save, earn and invest along with money management, develop financial literacy by “having their own debit card” monitored and controlled by adults.

Can they? Or, are we hooking kids on plastic for life?

Another perspective: the OECD PISA financial literacy mathematics tests tell a different story: guess who did not even make the 50 per cent mark – the largest consumer nation in the world!

Stay tuned in January for the full PISA test – let’s see how you adults score.

Where is Bermuda education in all of this?

Financial literacy should be mandated in one of the most complex financial jurisdictions in the world.

Readers! I am completely intrigued by this whole topic and am looking for feedback from you.

1. How do you feel about debit cards for children?

2. Do your children have debit cards?

3. What are the positives for you and them?

4. What are the negatives?

5. Biggest question: what are the long-term implications for these children maturing to adulthood – do you think they will be more financially savvy, and investing astute?

Please write to me at martha.myron@gmail.com Any correspondence will be kept completely anonymous.

References

Bermuda banks Clarien, Butterfield, and HSBC offer debit cards for youth family members, average ages ranging from 6-17, depending upon the institution’s offerings.

Student opinion: Should All Young People Learn How to Invest in the Stock Market? New York Times, by Michael Gonchar and Shannon Doyne, February. 1, 2021

Hear from the students themselves: https://tinyurl.com/y2yx26pw

Debit cards for kids and teens: What you need to know and our picks, CNET Money, Sarah Szczypinski November. 3, 2021. While the picks are in another jurisdiction, the information in this article is illuminating and well worth reading https://tinyurl.com/yyp9uvl5

Ohio just became the largest state to require personal finance education in schools, CNBC, by Carmen Reinicke November 4, 2021, https://tinyurl.com/yjrwpyw2

• Martha Harris Myron, a native Bermudian with US connections, is a qualified international cross-border financial planner, the author of The Bermuda Islander Financial Planning Primers, international financial consultant to the Olderhood Group Bermuda Ltd. All proceeds from these articles are donated by The Royal Gazette to the Salvation Army, Bermuda. Contact: martha@pondstraddler.com