Are Pre-Paid Credit Cards for Kids a Good Idea?

To pre-pay, or not to pre-pay? That is a mom-of-teens question…

I’ve told you guys before that I don’t think enough kids are learning about money management. I remember taking a class in High School called “Single Living”; it taught skills like how to make a budget, how to balance a checkbook, rental agreements, etc. We once did a project where we made our imaginary budgets, and then made a grocery list that we thought would fit our budget – then took a field trip to the grocery store, to write down the actual prices of the foods on our list. 99% of the kids in class were completely shocked by the price of food – and had spent around triple what they thought they would. But, since I’d been helping my mom with grocery shopping for years, I was the only one who actually spent a little less than my budget – and then did a presentation on couponing too!

How I became a frugal momma…

My mom was really honest with us about money. We knew that the reason we couldn’t have everything we wanted was because we couldn’t afford it all. But while we struggled financially while I was growing up, it was never a negative thing – we just worked together as a family to figure out what was most important to each of us, and sacrificed other things to get them. Mom worked 2-3 jobs sometimes – which meant we did more housework, to help her out. We all learned budgeting basics at a pretty young age. But I am SO surprised to see how many people graduate high school with NO understanding of money what-so-ever.

Busy Mom Solution – A tool to help:

I’ve also talked to you before about what a great tool pre-paid credit cards can be. As a young adult, I used them to help me budget. And I really love them as an option to get teenagers used to using credit – once their out on their own, most kids sign up for a ton of cards, rack up a ton of debt, and have no idea exactly how it happened. BUT – giving them a pre-paid card, that you have a lot of control over, can teach them some budgeting basics earlier on. Plus, you take away the temptation to spend their money on drugs, alcohol, or other dangerous activities – you get to see a record of exactly where they’re spending!

Here are some great ways to use them:

• School shopping: Load an agreed-upon amount into the card, and let your child to their own shopping. When they don’t have mommy or daddy to spend more, they quickly realize that they don’t need those designer jeans as much, when it means they only get 2 shirts for the year. And if they do splurge on the jeans anyway – they’ll soon learn why it was a mistake. Lessons that are important to learn. Working in retail I saw a HUGE difference in the way kids shop when they’re using moms money, or using their own limited clothing allowance.
• Emergency Cash: So many kids might lose cash, or spend it if they’re holding it more than say – 5 minutes. But, they can carry a pre-paid card, and you’ll know that they always have some cash in an emergency situation – peace of mind is worth it.
• Allowance: An easy way to give the kids their weekly allowance, without having to run to the bank for cash each week. Or – pay your babysitter each week by loading it onto a pre-paid card. Easy peasy solution.
• The most important factor: I remember in school, parents would give their kids lunch money, or spending money, and some would use that for alcohol or drugs. When you’re using a pre-paid card like this to give them cash – you get to see exactly what they spend it on. Much safer.

Cool features:

• Lock and Unlock Your Teen’s Card with a Simple Text.
• Monitor Purchase Alerts in Real-Time on Your Mobile Phone – so you can quickly catch problems before they get out of control.
• Family or Friends Can Reload Funds – which is great for holidays, birthdays, or graduations.
• Plus – there is NO risk of overdrafts, and no credit risk for them. It’s a safe way to learn to use a card responsibly.
• You can see where they spend it, to ensure they’re being safe.

What do you think?

Have you used pre-paid cards for your kids? Are you for, or against the idea? Are there other ways that you help to teach your kids money management? I’d love to hear your tips! If you’re interested in learning more about pre-paid cards – the one I use is the Bill My Parents card, from MasterCard. You can also use this now at Amazon – which can help the kids learn about safe online shopping too. The rates are totally reasonable, and I’ve used them for a long time with no problems. My boyfriends two other daughters are teenagers now, and budgeting, money, and allowance are topics we’ve been giving a lot of thought too – I’d love for you to share your thoughts, ideas, and tips in the comments….