A Prepaid Card that Teaches Teenagers About Money and Spending© L. Marie Dubuque

Jan 24, 2008

Want to give your child a credit card but worried about overspending? A prepaid credit card will help your teen learn about money, credit and responsibility.

Handing your teenager a credit card is a lot like handing over free money…But it doesn’t have to be. You can monitor your child’s expenses and allow your teen a little control and flexibility. With a prepaid credit card, your teenager can spend freely up to a point. Unlike regular credit and debit cards, you can’t go over the spending limit, and when the money is gone it’s gone.

How prepaid cards work:

• You can load them with however much money you want. Then monitor your child’s expenses with online statements, or by calling the credit card company. You can reload the card either online or by phone.
• Prepaid cards are safer than cash, because most card issuers guarantee you’ll be refunded for unauthorized purchases. If you’re worried, don’t put a large amount of money on the card at any one time. And safeguard your PIN number. Also be sure to change it often.
• Relatives can put money on the card, instead of giving cash or sending a check. You can authorize family members to add money to the card any time.

Credit card companies are marketing special prepaid cards just for teens. Visa’s is called Buxx and aims its campaign at kids and their parents. Mastercard calls its version the Allowcard. The company devotes a section of its site to teaching kids about money. If you register, you’ll receive new money tips every month.

No overdraft fees, no interest charges, no late fees…Allowance 21st century style. But if you want to teach your kids how to handle money, not just how to spend it, you need to impose strict guidelines on your teen.

Teach kids how to manage the prepaid card:

• Let them know when the money is gone, it’s gone, no exceptions. That way, they’ll learn how to budget more efficiently, and make wise purchases.
• Make them work for the card, by doing chores around the house or helping with a family business. It’s never too early to begin teaching work ethic and responsibility.
• Monitor your teen’s purchases. Don’t be afraid to speak up if you think your child is spending too much on clothes or other non-essential items. Make it a requirement to put a certain percentage into a college fund.

Before signing up for a prepaid Visa or Mastercard, find out about any fees involved. Including an initial activation charge and monthly access fees. Mastercard charges $3.50 per month for the Allowcard. It might be worth the piece of mind knowing your kid can’t go on a spending spree…At least not without you knowing about it.