When my son turned 17 the summer before his senior year, he got a secured Visa credit card with our credit union. He had $1000 in the bank; he took out a line of credit for $200, which was “secured” by making his available balance $800 (e.g., the bank put the $200 aside as collateral). It was in his name, so he starts building credit by paying it off; the credit limit was high enough to allow him some leeway in purchasing things, but low enough that he wasn’t going to acquire a mountain of debt quickly if he went crazy with it. We were still paying for his gas, but I wanted him to have a way of filling up the car on his own, and/or for paying for things that I asked him to stop off and get. Plus, it provided a year for him to exercise credit while under our supervision. The arrangement was that a week before the payment date, we’d sit down together and look at the charges on his card online. Gas and things I’d asked him to purchase, I would pay for by transferring the amount into his account; then he’d pay the credit card off from his account (so he was paying for any “extra” purchases he’d made).
The other main thing we did was have him plan out a general allocation of his $ from his summer job. We asked him to put together a plan for how he was going to divide up his paycheck between short term spending money (e.g., nights out with friends, fast food, impulse buys, etc.), short term savings (e.g., money to spend on something specific he wanted), long term savings (for nothing in particular – just to establish a saving habit for expenses that would accrue during the year that he wasn’t working), charitable contributions, saving for gifts for family members (e.g., birthdays, Christmas, etc.), etc., and we sat down and discussed it. He did a good job – I don’t recall how things divided out, but he’s pretty frugal by nature. The money from his summer job had to pay for his personal expenses during the following school year (e.g., yearbook, homecoming, class night, prom, nights out with friends, etc…). He was good about it … at no point the following year did he run out of money; he even (on his own) set aside the $ he knew he’d need for prom expenses ahead of time so he didn’t spend too much during the year and run short.
The summer before college, our general arrangement did not change at all; we continued to pay for his gas, while he paid for his personal expenses. He used graduation gift $ to buy most of what he needed for school. We told him we would pay for his computer and books; we wanted him to consider his summer job $ as money he’d live off of during the school year (e.g., laundry, activities, nights out, restocking supplies, etc.). We don’t get “send money” phone calls, because that is his responsibility; I do send an occasional care package, which he appreciates. He did request an increase in his credit limit from the bank before he went to school so he would have enough credit to buy books, etc. on the card; it is now $1000. Again, it is a secured credit card, so the balance available to him in his account is reduced by his credit limit (e.g., if he had $3000 in the bank, only $2000 is available to him). He apparently set up a reminder on his phone for about a week before the payment is due; every month I get a text from him asking me to please pay $x amount into his account for <whatever expenses="" he’s="" charged="" that="" we="" said="" we’d="" cover="">. Then he pays off the credit card from his account. Even though he’s paying for his things on his own, usually there are things on the card that we pay for – books, picking up Chinese takeout for me while he was home on break, etc…
So far this has worked well to teach the principles of financial responsibility and giving him some freedom without the risk of it getting out of control. If he misses a payment, he’ll have to deal with the bank/pay the interest, etc., and it will be a learning experience, but he’s not going to rack up huge amounts of debt.
A debit card would be a meaningful way to teach money management.