Teens and money: how do we go about teaching them to spend it wisely?
Well, believe it or not, there are times when one finds some helpful suggestions from television commercials and it just so happens that I saw a product advertised that gave me an idea about how to teach this important concept. It revolved around a prepaid credit card for teenagers, and even though I realize that the aim of the issuer is to find another way to increase its bottom line, I could see several advantages for both teens and parents.
These advantages appealed to me personally since, just last week, our daughter was talking about an incident that happened to her and her son (our grandson) that reflects the struggles that young teens face when it comes to budgeting their finances. In this incident, our daughter had given her son (age 13) $30 in cash to buy his lunches at school. A normal price for a lunch meal is $2.50 per meal and, in theory, the money should have lasted him between seven to 10 school days. However, after four days, the boy had depleted all of his cash and come back to Mom asking for more money.
What’s interesting about this situation is that it mirrors what many young teens face as they attempt to comprehend the concept of money and how to budget it. At this age, while many teens have been given an allowance, they are not expected to stay within its limits and, once it is exhausted, they simply go to Mom or Dad and state their wants or needs. So, now that they are nearing adulthood, how do we teach them to control their cash so that it covers their needs? Does the parent have to budget it for them by monitoring their spending habits by only doling out a portion of their allowance at a time? If the parent does that, how will they ever learn what happens if they don’t hold back those funds needed for future purchases?
It is unfortunate, but we, as parents or grandparents, find it very hard to see our children want for anything, and I know that many of you who are reading this article have already experienced this situation with your own children. So how does one instill upon a teen the value of money? First, remember that, unless a teen is earning their own cash, what seems natural to us may seem extremely foreign to them. In fact, understanding the value of a dollar may seem like a foreign subject since they are accustomed to simply asking and receiving without thought of how hard the parent works to earn that dollar.
I say all of this to explain what I believe are the advantages of a prepaid credit card for teenagers.
- Unlike a traditional credit card, there is no positive or negative effect on either the parent or teen’s credit score.
- If there is money in the account, the teen can spend it.
- Once the money is gone, it is gone.
- Every time a transaction is made, the parent receives a text message indicating the amount of the purchase and what is being bought.
- In emergencies, parents are free to add additional funds to the account.
- Monetary gifts for birthdays, school achievements, or other special events can be added to the teen’s account.
- If the card is lost, the parent can report the lost credit card, which will then be voided and a new card issued.
- In addition, if the parent sees that the teen is spending the money unwisely, they are free to lock the credit card to prohibit purchases.
I see all of these as advantageous means of allowing a teen the ability to control their finances while giving the parent the right to monitor their spending. I do know, however, that there is no one single solution for every teenager and their families, but I also think that this prepaid credit card could be a solution for some families.
So, you decide that you think that this solution would be right for your teenager, but which company should you use? There are a number of companies that handle the prepaid credit cards for teens, but you will have to select which one is right for your family. If you need help finding those companies, you can simply do a Google search and read what the different companies have to offer and at what rate of interest. To make it even easier to begin your search, I have placed a link below to Bill My Parents. This is not meant as a personal recommendation of the site since I have never used the service, but more of a place for parents to see what is being offered and how this type of prepaid service functions.
If you have tried using a prepaid credit card for your teen, please share with us your experience.
CC licensed Flickr photo above shared by 401(K) 2012