In all of the conversations surrounding education reform, one subject continues to receive very little love: financial literacy. Statistics show that the United States is drowning in debt and largely unprepared for retirement, but it’s hard to blame anybody other than people who never taught financial literacy to their children.

If it’s not going to happen in schools, it has to happen at home. One way to teach is through real-world training with a debit card. It provides the convenience of a credit card without building up debt since the person who uses it draws on money already in a bank account. That makes a debit card a good choice for a teen's first card – something he or she can learn to use while still living at home. (For a detailed discussion, see Credit vs. Debit Cards: Which Is Better?)

Key Takeaways

  • Teenagers like to shop - online and at the mall - and so many of them desire a credit card.
  • Many parents prefer giving teens a debit card instead, which won't damage credit scores and won't rack up more than they can afford.
  • Here, we look at the top 5 debit card options for teens - including newer app-based payments options.

Top 5 Debit Cards for Teens

Many financial institutions offer products to help children learn the basics of money without charging big fees and other balance-eroding charges. These five are among the best.

1. USAA Youth Spending

If you have a current or past military affiliation, check out USAA Youth Spending. This account can be set up for your age-13-or-older child, but you still hold all management rights.

Your child will have limited access to usaa.com, so he or she can’t see other accounts. Plus, you can set up spending limits and account alerts – say, if your kid exceeds the maximum spending limit or has a low account balance.

Teens also have access to the USAA mobile app and to more than 60,000 free ATMs nationwide, and there are overdraft protection options.

The account comes with a disappointing 0.01% APY, but the lack of fees – and the many ways to use this account to teach a child how to spend and save – make it worth it despite the low interest rate.

2. Capital One 360

You know the credit card, but you may not know that Capital One is also in the online banking business. The MONEY account is for kids who are at least 18, though children younger than that can have a joint account with an adult. It comes with a 0.25% APY, access to 39,000 free ATMs and, for teens who are 18 or over, text alerts any time they make a transaction. It doesn’t have all of the features of the USAA account, but even a little bit of interest teaches children the power of saving.

3. Bank of America Core Checking

If you’re looking for an account from a traditional neighborhood bank with a large footprint, Bank of America offers Core Checking – a checking account for young people under age 24 who are enrolled in school. There are no monthly fees, the debit card comes with a $0 liability guarantee, and the card can be turned off in the event that it’s lost or stolen. There’s nothing elaborate about the account, but for teens and young adults who don’t yet grasp the eroding effect of fees on a checking account, this account offers a vehicle for managing money without the high relative cost of traditional bank accounts.

4. Prepaid Cards

Instead of a real checking account, you might give your child a prepaid card. With this type of card, your son or daughter can’t spend more than he or she has, so overdraft fees and other costly mistakes are next to impossible. Most of the big banks have prepaid cards. (For more see How do prepaid debit cards work?)

If you’re a Chase customer, for example, the Chase Liquid card comes with a $4.95 per month flat fee and no other fees. Your child can use the card just like a debit card – make purchases, check the balance online – and parents can load money onto the card from their account.

The downside to prepaid cards? Many come with fees for just about everything, including loading money on the card. (See 8 Ways to Avoid Getting Burned by Prepaid Debit Cards.) In addition, because the card isn’t tied to a checking account, your child may not learn how to manage a real bank account.

5. Apps

Yes, there are apps that help to teach younger children how to manage their money from a very early age.

Check out Allowance Manager. At $49 per kid per year, it allows parents to pay an allowance to their children on a card and then track their usage as a way to teach financial literacy. Allowance Manager works on all mobile devices and also on computers.

Another app is FamZoo. You can set up payments for household chores or interest on kids' savings, penalties for missed work, expense sharing and contribution matching. You can sign up for a debit card or use IOUs, but the debit card comes with no fees if you load the funds through direct deposit from payroll. Subscriptions cost $5.99 per month but prepaying 24 months brings the cost down to $2.50 monthly. If you need more than four debit cards, you pay a one-time fee of $2 per card.

The Bottom Line

There are plenty of tools to help kids learn financial literacy. But nothing beats an engaged parent who knows that teaching kids how to manage money early will result in adults who are successful in navigating our increasingly complicated financial landscape.