Teaching your teenager to use a prepaid credit card can prove to be a difficult task. Nonetheless, a kid with such a card should have some sense of financial independence and understand the basics of managing their own finances without getting into debt. Essentially, it only requires some time, observation and diligence on your part for your teenager to become prudent with your credit card or their own.
The earlier one starts to learn these responsibilities, the better it becomes for everyone. Indeed, teens who don’t learn how to use their money wisely can find themselves in financial trouble before long. It’s therefore, important to explain to them the importance of their caution when it comes to overspending.
Prepaid cards offer a number of parental controls and limits. This allows a parent to make sure that their child learns their responsibility when entrusted with such cards. Consequently, it’s important that you allow them the benefit of knowing the amount of cash credited against their cards. Effectively, this gives the kids an edge of knowing their limits and helps to plan and budget much better. Nonetheless, it is important to load the card with realistic limits that benefit their age and lifestyles.
You can come up with weekly, monthly, or even a yearly limitation. If the funds are exhausted before their time lapse, then they will have a lot to explain, especially if they require some immediate top up. You don’t want to load the card with too much or with so little that they will immediately fall into the red but the amount should be discussed in accordance with their plans and needs for the time allotment you have set.
Granting your teenage kids prepaid credit cards is a great way to teach them how to budget without necessarily opening your credit lines. Because prepaid credit cards are used to purchase items in the same way as the conventional credit cards, your teenager will be able to decide whether they have enough on the card to purchase what it is they need and understand the consequences of going over their limit. You should both discuss how this overspending (if it is to occur) will be repaid.
These cards can allow teens to buy online what they would not be able to with just cash. Though they are a great idea in some sense, it would be smart to use it as a form of payment in return for them doing their chores or helping in some sense around the house as this way they can learn the value of their money. The added bonus of being given a credit card instead of cash is that they are being rewarded for their responsibility with more responsibility. It can teach teenagers that there are consequences to overspending and can teach them the value of budgeting for their credited money to last the allotted time you have already discussed!
Finally, if the card gets lost or misplaced, it can be canceled and replaced easily, unlike cash. If there is any emergency where your teenager does not have enough money, you also know they are safe in that they have a credit limit to fall back on. So long as your teen is educated in the consequences that can be associated with credit cards and limits and financial responsibility then there is no reason that you should not trust them with one.