If you’re looking to teach your children about money, prepaid cards for teens may be right for the job. Here are key factors to consider.
It’s hard to navigate the world with cash alone. These days, money is more likely to change hands through plastic and digital wallets than with coins and bills.
That’s as true for kids as it is for adults, if not more so. Teaching teenagers or even younger kids about money through using cash alone just doesn’t reflect current reality, and it may be doing them a disservice, according to some industry analysts.
Yet, many parents are uncomfortable with handing a teenager a credit card. It can send the wrong message of borrowing to spend.
Prepaid cards for teens provide an alternative to credit cards and cash. The cards can be used for spending like a credit card but without the debt. And cards designed for teens (or even younger children) come with apps where kids can manage their money. Something a little closer to how they’ll use money as adults.
Among teen cards, there are choices. Choosing the right card depends in part on the age and needs of your child, but there are some key factors to consider.
Financial Education Tools
Most prepaid cards for teenagers come with apps for both parents and teenagers. The app for teenagers should provide features that reinforce the money lessons that you’re trying to impart.
Savings and Budgeting
Look for cards that allow teenagers to monitor their spending, set savings goals, and work from a budget.
For example, the Greenlight comes with an app that gives children real-time visibility into their spending, and it allows parents to allocate allowance payments among spending, savings, and giving.
So you can work with your teenager to determine their own short-term saving goals. For example, they might want to save for a high-end gaming console or a pair of designer sneakers. You can help them come up with realistic time frames, then use the app to guide them to that goal.
Value of Work
Financial experts have different opinions on allowance and chore lists. Some personal finance gurus, like Dave Ramsey, suggest skipping allowance altogether. According to Ramsey, allowance reinforces the notion of entitlement rather than earning. Personal finance expert, Kimberly Palmer, takes a little different approach, saying that allowance can be “the most basic tool to start teaching your kids about money.”
Regardless of the differences, experts generally agree that parents should use chores, with or without allowance, as a way to start training children about the value of work.
While parents need to decide for their children, look for a prepaid card that allows you the flexibility to reinforce that decision. The FamZoo Prepaid Card offers parents a feature to set chore lists and even attach dollar amounts to specific tasks. Greenlight has similar functionality, and lets parents make chore completion a condition of allowance.
If you are a parent in the pro allowance camp, look for a card that allows you to automate payments to take one item off your chore list. Most of the cards designed for teens have this feature.
Parental Control Safety Net
A critical part of learning is making mistakes. An essential part of parenting is placing boundaries, so our children’s mistakes are learning experiences rather than catastrophes.
Most teen-specific prepaid cards provide parents with the ability to monitor your child’s spending, and that’s important. But there are some other features to look for.
For instance, some cards, like the GoHenry Prepaid Card, offer parents the ability to set spending rules. Parents can block online use, for example–a feature that might be suitable for younger children.
Other cards allow parents to restrict ATM use–helpful to make sure teens don’t rack up ATM fees.
Direct Deposit
If your teenager has a job, then direct deposit is important. Direct deposit allows teens to deposit their paycheck straight to their card rather than having to mess around transferring it from a bank account, which they may not even have. It’s also faster than getting a paper check and then depositing it on the card.
Loading the Card
Check what methods the card allows for loading. Teen cards are sub-accounts on a parent’s primary account. So, they all offer the ability to transfer funds from the parent’s account without charge, and they all allow parents to fund their account with bank account transfers, also for free.
If your teenager gets a regular allowance, look into a card that allows automates the transfer. Some cards will even trigger an allowance payment only when the chores are complete. (Some will let you take money away from the child if they aren’t doing their chores).
Make sure that the card and app offer the loading choices both you and your teenager need.
Payment Methods
Teen prepaid cards all carry the Visa or MasterCard brands and can be used pretty much anywhere.
However, if mobile apps are where your teen lives, you might want to check compatibility with one of the digital wallets, like Apple Pay or Google Pay. Greenlight supports both, but it’s the exception.
If P2P apps, like Venmo, are in your teens’ app library, the good news is that Venmo supports transfers to most prepaid cards, including teen cards. But be aware of Venmo’s fees for any “instant transfer” (to a prepaid card or otherwise). Venmo charges 1% with a minimum of $.25 for the instant part.
It provides another good reason for parental oversight features–to keep an eye on fees for using some of the more popular apps.
Cost
Teen and allowance cards come with fees. Typically, cards have monthly fees–either by child or, in some cases, by family. Generally, that’s going to be the only fee that is unavoidable for a teen prepaid card.
But some charge ATM fees. If your teen never uses cash (and that seems to be more and more the case), then ATM fees may not be an issue. Otherwise, either look for a card with some fee-free ATM options, like Famzoo, or at least the ability to restrict ATM use, like Greenlight.