Using Prepaid Debit Cards to Teach Teenagers about Money Management and Building Credit

Like many parents, you try hard to provide for your children and teach them the ways of the world, so that they can become a successful and independent adult. But one of the biggest areas that is constantly overlooked by parents is the ability to teach teenagers and young adults the importance of money management and building a healthy and secure credit history.

When your teenager begins to work inside or outside the home for an allowance or a wage, it is important to help them understand how to manage and spend that money wisely. Many adults will often co-sign on a bank account, so that their child, under 18 years of age, will have access to a savings or checking account. However, more and more parents are choosing to forego this option, because they do not want to be financially obligated to another bank account, and prefer to teach their children to spend responsibly and independently, using a prepaid debit card.

There are a lot of options for prepaid debit cards and it is important to read the terms and conditions to any financial product before applying. Most companies only require that the person responsible for the debit card be over 14 years of age, therefore, not requiring an adult to co-sign, freeing them of any financial obligation. Prepaid debit cards have the same advantages as checking debit cards but DO NOT allow people to purchase items over the amount of money they currently have available on that card, hence no large overdraft or insufficient funds fees. Some cards are even equipped so that parents can transfer money to their child's card online or through a retailer for a nominal cost or for free. While prepaid debit cards do have some fees associated with them, sometimes these fees serve as a good deterrent for teenagers.

It is a common known fact that prepaid debit cards charge a fee to access cash, but this fees actual helps children think twice about pulling cash out of an ATM, helping to keep funds safe, making it less likely that your child will lose money, or be tempted to spend cash on frivolous purchases. And since most prepaid debit card transactions can be monitored online for free, parents can also sit down with children to analyze and help supervise what their money is being spent on.

The best part about having your child use a prepaid debit card is that they are helping to build good credit history on their own. Prepaid debit cards will frequently report all positive transactions made on the card to the three main credit bureaus. Therefore, when your child is ready to make larger purchases, or responsibly open a line of credit, their limited credit history will be expanded based on their past years of positive credit reporting.

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