How Teaching Good Money Habits With Prepaid Debit Cards for Teens Can Increase Your Child's Financial Literacy

"Mom, I want this!" "Dad, will you get me that?" "All my friends have one of those!"

Dealing with kids' unending requests and pleas can exhaust any parent. According to Bill Dwight, CEO and Founder of the virtual family bank,, kids incessantly ask for things because - at least when they're spending Mom and Dad's money - the supply seems infinite.

"As soon as possible, I want kids to start appreciating that money is a finite resource," he said. Parents can teach that lesson to kids by putting money in their little hands, Dwight explained. When kids possess their own money and are faced with having to use it at the checkout stand, everything changes. "As soon as you turn ownership over to the kid, that's a whole different ball game," he said.

Benefits of Prepaid Debit Cards for Teens

Nowadays, there are many reasons why parents may hesitate to stock their children with cash. Not only can it be lost or stolen, it can't be used at the modern-day checkout line (online purchasing). So a great option is for parents to obtain prepaid debit cards for teens. Although most cards require the cardholder to be at least 13 years old, Dwight explained that a parent can obtain a card in his or her name and customize the card to say something like "Aden's Spending" beneath the cardholder name.

According to Dwight, one benefit of using prepaid debit cards for teens is that they are safer than cash since the money is stored in a secure account. A prepaid card can also be used online and pretty much anywhere else as long as it's a MasterCard or VISA. Additionally, it tracks transactions, and kids learn about online banking and managing a card, which is the primary way they will handle money as an adult.

Still, Beverly Harzog, author of "Confessions of a Credit Junkie," recommends teaching children to handle cash before moving to paying their allowance on plastic for example. "They need to make the connection that a prepaid card is still money and so they need to practice mindful spending," she said.
And Sammy Renick, Founder of the kids' financial website, says that financial education can and should start as early as 1, 2 and 3 years old. "Kids are like sponges. They're soaking up everything. Their ideas are already being shaped. They might not say anything, but they're watching," he said.

Once parents lay that educational foundation and teach kids that money isn't infinite and that plastic is real money, it might be a good time to introduce prepaid debit cards. Both Harzog and Renick said that the parents are the only ones who will know when their children are ready for this responsibility.

"This is an individual decision. Parents are the true experts here and they know if their child is ready," Harzog said.

There are many options when choosing between prepaid debit cards for teens. Parents are advised to carefully compare benefits and fees as some cards charge a several types of fees, such a cash load and monthly maintenance fees. Also, compare card technology and capabilities and choose a card that is FDIC-insured.

The FamZoo prepaid cards, for example, are ones used collaboratively to allow families to share funds between members. They utilize FamZoo's Virtual Family Bank software, from which parents can debit their kids' accounts for misbehavior, add funds as rewards, and track their kids' spending. Visa Buxx, another popular prepaid teen card option that has been around for years, even allows teens to design their own card by uploading their own photos.

That's another benefit to prepaid debit cards - no trips to the ATM to retrieve cash. Parents can simply go online to transfer funds to their kids at any time.

Using Cards to Teach Good Money Habits

There are many ways that parents can use prepaid debit cards to teach good money habits. First, make sure they get a card with free online and mobile access to its balance and spending transactions. Then, put them in charge of their purchases. If they ask for something in the checkout line, have them check their balances and see if they have sufficient funds. If not, they'll just have to save a little longer.

Parents can also link their kids' prepaid debit cards to their online music and gaming accounts so that those purchases are deducted from their own money. No more running up Mom and Dad's credit cards online!

Parents could also choose to reward their kids for patient saving by granting them "interest payments" every month or so. The more money the kids' save and keep in their accounts, the more they get from Mom and Dad. This way they learn the value of saving over time.

According to Renick, more and more research is showing that people's financial habits begin as young children. This research reflects a growing national emphasis on financial literacy among youth by such organizations as the Jumpstart Coalition for Personal Financial Literacy. The bottom line is that parents simply cannot ignore the task of training their children to handle money responsibly. "[Kids'] ability to grasp concepts is unbelievable," Renick said. "When you think they're ready, introduce them to the prepaid debit card and teach them what it's all about. Don't underestimate your kids' ability to learn about these things."

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