Purchase/money/allowance management for teenagers

Question

I have two kids older than 13 but younger than 18. One is 16+. As they start making their own purchasing decisions, I'm trying to set things up to be convenient for everyone. My current problems are:

• I have to give the kids allowance in cash, meaning constant trips to the ATM.
• Cash isn't so useful anymore; much of what they want to buy is online.
• When they buy online, it's usually attached to my credit card, which is then hard to track among my own purchases, and even then they give me the cash, which is then a pain for me to manage. (I categorize expenses, and wads of cash mix together and become hard to track.)

The kids have bank accounts, to which I could transfer allowance funding electronically, but they aren't very accessible. The 16+ account has an ATM card, but that still means a trip to the bank. The younger child account does not allow withdrawals unless my child and I go to a branch in person. And then, again, the child has cash, which is not so useful.

How can I set things up so I can give them allowance electronically, and they can spend it electronically (or convert to cash), without needing me as a clearinghouse? Can children have their own credit or debit cards, secured by an account that's theirs to manage?

(I should add that my kids are competent and trustworthy; this is only about funding mechanics, not oversight or protection, which I intend to handle via education.) Also, I'm in the United States.

Answer 1

I don't think that any bank will issue a credit card solely to a minor (I suspect it isn't legal, but they wouldn't want an unsecured debt against a minor anyway). One option that I've seen is to open a joint credit card account with them with a low maximum (https://www.creditcards.com/credit-card-news/what-is-the-minimum-age-to-be-an-authorized-user.php has a list of credit card issuers that allow this). The biggest disadvantage to this is that you can't fix the maximum to the kid's allowance, so they can go over without realizing it, and of course you don't want to incur interest by not paying off the balance. This may not be a concern for you if you don't think they'll take advantage of it, as I said I've seen this strategy work with a few teenagers without an issue.

If you're mostly concerned about online purchases, you could also consider creating an account with a digital wallet service (e.g. Google Pay) and just pay their allowance into it. It looks like PayPal at least does not allow anyone under 18, so if you have to set up the account in your name then they wouldn't be able to use it in person. Given that, you may want to only pay some of their allowance into the wallet and give them the rest in cash.

Answer 2

I have no actual experience with trying this, but I think giving your kids each a reloadable prepaid debit card might be the best way to handle it.

Such cards are usable online and in person as if they were standard credit/debit cards, and you can fund them electronically through your own bank. Plus, since they're debit, they can convert it to cash at any ATM (likely subject to fees) or get cash back when they use it at locations that support it (typically grocery stores, in my experience).

Just watch out for the specific fees associated with whichever cards you choose. This list has some options with low fees, but you'll need to look through them to see which set of fees is the best fit for your family.