Empowering Financial Independence: The Evolution and Future of Debit Cards for Young Savers

By Alexa Serrano Cruz 

Among my close friends, we often discuss a common grievance: "Why weren't we taught crucial money management skills during our formative years?" In a society driven by consumerism and plagued by financial uncertainties, there’s an apparent absence of practical life skills, particularly as it relates to financial literacy.

Approximately 67% of Americans believe that schools should bear the responsibility of teaching financial literacy skills to kids, according to a Finder.com survey. Reflecting this growing sentiment, 18 states have now mandated personal finance education in their curriculum—an increase of 17.8% from just last year, according to Next Gen Personal Finance's 2023 Financial Education Report.

Joining forces: Bridging the financial education gap

It’s not just schools that are stepping up: Fintechs, banks and parents are taking proactive measures to address this gap. In fact, a staggering 72% of Americans report that their children now have bank accounts, according to Finder’s Consumer Confidence Index. 

Among the popular choices for young savers are debit cards, often offered by fintech companies in partnership with banks. These all-in-one accounts serve not only as a platform for parents to teach their children about saving, giving, and responsible spending, but they also come equipped with features like chore tracking, allowance management, and even savings rewards or parent-paid interest.

These cards have gained immense popularity, leading to a highly competitive space among fintechs, each striving to one-up another. For instance, Greenlight and BusyKid are two recognizable names in the space. BusyKid was among the first to offer investing tools, and then Greenlight followed suit.

Due to the competitiveness, various types of accounts are now available, each offering a plethora of features, such as cashback rewards, financial literacy games, savings rewards and the ability to invest in stocks and cryptocurrencies.

Future innovations: The next wave of features

In the realm of exciting features, certain providers have already set the bar high. But as competition intensifies, other kids’ cards will strive to offer similar or even more advanced features to stay ahead in the market. We can anticipate a growing trend of providers offering these three features:

1. Loans: Famzoo has taken the lead by offering a unique feature that allows parents to set up mock loans for their children, providing a practical lesson in debt repayment. The process involves kids requesting a loan from their parents, who then provide the funds and determine the interest amount the child needs to pay back.
2. Credit-building: Step currently stands as the sole provider of cards for kids and young adults that actively contributes to building credit safely. Step is a type of secured debit card that limits users to spending only the available amount in their account. Each month, Step automatically pays off the balance using the funds in the account. Once children turn 18 years old, they can send their transaction history to credit bureaus, helping establish a credit history.
3. Safety and privacy: Mazoola is currently the only kids’ card provider that’s COPPA-compliant. This means they’ve undergone rigorous testing to safeguard kids' personal information as per the Children's Online Privacy Protection Act. Greenlight is another card that offers safety protections. Depending on the chosen plan, customers can access features like identity theft alerts, purchase protections, SOS 911 dispatch and car crash detection alerts.

Bottom line

As the demand for financial literacy continues to rise, kids’ debit card providers are poised to embrace innovation and introduce a range of new features. By taking this proactive approach, they can better meet the changing needs of young savers and their families, guaranteeing a super enriching and empowering financial experience for the next generation.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.