The Debt Panel: 'My daughter is overspending on her debit card'

The Dubai parent is worried that their teenager is racking up debt through buy now, pay later schemes

Nick Donaldson / Getty

I have a teenage daughter and recently gave her a prepaid debit card. Although there are online spending and cash withdrawal limits on the card, I have noticed that my daughter is going overboard with her spending.

Initially, I had set her a spending budget of Dh1,000 ($272) per month. But she appears to have no control over her spending and is demanding that I increase her pocket money every month. She refuses to take no for an answer.

I am struggling to increase her allowance as my monthly salary is Dh20,000. We are a family of four and have other financial responsibilities.

I had hoped the prepaid card would teach her money management skills such as saving, budgeting and spending wisely.

From her transaction history, she seems to be spending most of the money on buying things online through buy now, pay later schemes to get around the spending limit. But now I am worried that she is also getting into debt.

How can I warn her of the perils of overspending and bring her back on track financially? KH, Dubai

Debt panellist 1: Steve Cronin, founder of DeadSimpleSaving.com

It is better to learn about controlling your spending when you are a teenager with few responsibilities than when you are an adult with many.

Teenagers like to explore boundaries and your daughter may get upset by your “unreasonable” limits on her life, especially so if all her friends have lots of pocket money and she becomes jealous or even embarrassed by not being able to keep up with them.

However, this is an important lesson, and you can teach it well if you are understanding and reasonable but also firm.

There is added pressure given that you cannot afford to give her more money. But even if you could afford to give her Dh50,000 per month, your approach would not have to change if you decided that Dh1,000 was the appropriate amount for her.

Your financial instincts are good. A prepaid card is a good way to teach her about saving and budgeting. Also, her clever BNPL tactics are inevitably going to end in tears and problems.

Kicking the financial can down the road, which BNPL allows you to do, always tempts people to buy more now than they can afford.

Is she mature enough to buy nothing in the months when she has to use all her pocket money to pay off previous purchases? Will she even have enough pocket money to meet the BNPL payment deadlines? I doubt it.

So, she needs to learn this particular lesson now rather than in later life. Also, the card is likely under your guarantee, so you will ultimately be liable for any debts incurred.

Clear some time and space in both your diaries and take your daughter for a walk. Not too many distractions, no phones allowed. These are the messages you need to get across:

1. You understand that it can be difficult to get by on Dh1,000 per month when there are so many great things to buy and do, especially when her friends have more pocket money or their parents buy them whatever they want. What problems could her friends have when they are adults if their parents always bought them everything without any kind of budget or planning?

2. You have set her pocket money at Dh1,000 for two very good reasons. First, she is part of a family of four people and you earn Dh20,000 per month. You spend A on rent, B on education, C on activities, D on food, E on cars and F on saving for the future. You might as well be honest with her, so she can understand family budgeting. Therefore, you can only afford to give her Dh1,000 per month right now.

3. More importantly, you are giving her a prepaid debit card with Dh1,000 on it, as an exercise in trust and responsibility. You trust her with the card, and trust involves behaving the right way even when her parents aren’t around. She has to demonstrate that she can plan her spending, set a budget for things she wants to buy, say no to other things and, most importantly, not get into debt. If she successfully demonstrates these skills, you will consider raising her allowance when you can afford it. Or you will pay for some categories of items yourself.

4. She needs to learn that she can afford anything but not everything. Making hard choices and planning ahead is a big part of life.

5. BNPL is not an acceptable way to manage money – for anyone. If she did use it, how would she make the later payments? Would she really be willing to stop any other spending? Does she think the payment date will never arrive? It’s easy to live in the moment.

6. If you see any more BNPL purchases on her card statement (yes, you will be looking until she has established that you can trust her), you will cancel the card immediately and her pocket money will be halved.

7. She has to now come up with a plan for how she will cover the existing BNPL payments for items she has already purchased. You expect to see a schedule of all the payments due and whether they can be covered by her pocket money in the coming months.

Don’t expect to be “Popular Parent” after this talk. But you will have given your daughter a very clear and important lesson. Good luck!

Debt panellist 2: Carol Glynn, founder of Conscious Finance Coaching

Dealing with a teenager's overspending can be challenging, but there are steps you can take to address the issue and teach your daughter about financial responsibility.

Simply giving her a prepaid card without communication of boundaries and teaching her basic financial literacy will not teach her good money management skills.

She needs to learn the basics of money management from you or from reliable books or teachers and then a card will help her practise the money management skills she has learnt.

It's great that you want your daughter to have these skills, and the card is a good way to learn about how money works. I have some suggestions that can help you and your daughter further set her up for financial success.

First, sit down with your daughter and have an open, honest conversation about her spending habits and your concerns.

Explain to her the importance of managing money wisely, the consequences of overspending and the limitations of your family's budget.

Emphasise the need to prioritise needs over wants and the value of saving for the future. Also, ask her why she is spending in the way she does.

Setting clear expectations is very important. Reinforce the importance of the initial spending limit you set and explain that exceeding it is not an option.

Watch: The debt cycle

It's also important to establish clear consequences for overspending, such as reducing her allowance or temporarily suspending the use of the prepaid card, if necessary.

Educate her about financial responsibility by helping your daughter to understand the concepts of budgeting, saving, and financial planning.

Teach her how to create a budget by setting aside money for different categories, such as savings, entertainment, and personal expenses, and also encourage her to track her spending and review it regularly to gain insight into her financial habits.

One area I see teenagers struggle with when they first get access to money is delayed gratification.

Discuss the concept of delayed gratification with your daughter. Encourage her to save up for larger purchases rather than relying on BNPL schemes and explain the potential risks and consequences of accumulating debt.

Many adults don't fully understand BNPL schemes so don't assume she knows what she has signed up to and how the repayments work.

Potentially, the most important thing you can do is to lead by example. Show your daughter responsible financial behaviour by demonstrating good money management skills yourself.

Let her see how you handle your own finances, make thoughtful purchasing decisions and prioritise saving.

If she is still eager to have a higher allowance, encourage her to explore opportunities to earn money, such as part-time jobs like babysitting, dog-walking, or other paid activities.

This can provide a valuable lesson in the value of money and the effort required to earn it.

You could also consider alternative options to the prepaid card that may be better suited to your daughter's needs and help enforce spending limits more effectively.

Let her see how you handle your own finances, make thoughtful purchasing decisions and prioritise saving

Carol Glynn,
founder of Conscious Finance Coaching

For example, you could give her a set amount of cash each week and let her manage her expenses within that limit.

Prepaid cards are convenient and have benefits, such as expense tracking, but nothing beats starting out with having cash as a tangible way to learn money management skills.

This will also remove access to BNPL schemes. Introduce your daughter to books, articles, or online resources that focus on personal finance and financial literacy for teenagers.

This can help her to develop a better understanding of money management and make more informed decisions.

Remember, addressing overspending requires patience and persistence. It may take time for your daughter to grasp the importance of financial responsibility.

Be supportive, but also firm in setting and enforcing boundaries to help her develop healthy spending habits.

Debt panellist 3: Marilyn Pinto, founder of KFI Global

First of all, I empathise with you. It’s really hard to get through our teenagers on money matters, particularly because neither they nor we have had any formal training around money.

Getting your daughter a prepaid debit card isn’t going to do much to teach her any money management skills.

It’s important for her to first learn to develop a proper money mindset, which will set up a good foundation on which to then overlay other skills, such as saving, spending mindfully and budgeting appropriately.

You need to set very clear and non-negotiable criteria around her spending, such as not enrolling for any BNPL schemes. Getting an allowance is a privilege, not a right and she needs to prove she’s mature enough to be given this.

You will need to have some serious conversations with her around your concerns and worries for the family.

In my experience, if done properly, most teenagers are quick to rise to the occasion and help out financially where they can, particularly if that means being more careful with their spending.

Confide, don’t lecture, because teenagers tend to switch off when we get into lecture mode. Speak honestly about what you’re worried about and I am quite sure your daughter will begin to see things differently.

Ensure that she gets some proper financial education training before you hand over an allowance, just like we wouldn’t let our kids drive without enrolling them for driving classes.

This is important as it would ensure that she understands not just the mechanics of how money works but also the psychology behind advertising campaigns and cognitive biases around money.

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to [e-mail]