22 April 2008
Teaching your children money management skills with prepaid credit cards
Posted by tom under: Personal Finance .
Teaching your children money management skills with prepaid credit cards
Money management skills are essential in todays world yet we have little education in the subject. So many adults have learned the hard way that money management skills are important it used to be far more difficult to get into more debt than you could handle but now with credit cards in common use it is all too easy to get into debt problems. Credit cards are going to be around for the foreseeable future and it makes good sense that we teach our children how to manage their finances in a responsible way. Statistics seem to suggest that a majority of recent high school graduates cannot balance a checkbook! This should be a big warning for our kids as they develop into adults and use financial products. Ironically, one useful way to teach our kids about money management is with prepaid credit cards for children.
We as parents know that kids seem to think that there is a bottomless pit of money from which to draw and they think we can purchase every toy and goodie they want. It is very difficult to make them appreciate the value of money. When your child gets to about twelve years old, a prepaid credit cards for kids can provide an eye-opening lesson and perspectives on the value of money.
When you were growing up back in the 1970s, you will remember the offers of credit cards which streamed into your mailbox without you asking for them. Credit card companies made the proposition so attractive that they were difficult to resist? As a result of this, plenty of people got in financial trouble that was hard to rectify.
With a prepaid credit card for children, you can turn this idea on its head. Kids who yearn to be in control of some aspects of their lives can be given the responsibility to decide what they can afford for themselves. Instead of them saying, Hey, Mom, it’s only so much. Well, you as parents now have your chance to teach them what $20 really means in the bigger picture. Whereas $20 is nothing when it’s coming out of Mom’s wallet, a $20 bill placed in their hands is another story.
To achieve the greatest effect you should begin with the purchase of your kids prepaid credit card in the amount of $50. An impressive amount for a young child. Make it clear that they are in complete control of how they use the available funds, but once it’s spent, don’t come to you looking for more. Let the child know how long this windfall must last.
You should explain the idea and the concept behind this prepaid credit card for children. It is a step into the grown-up world of money. The kids must understand that, although they can go into almost any store and make a purchase, the available money decreases with each purchase. Buying a soda and a bag of chips depletes their buying power and may also incur a transaction fee for using the card.
You may like to suggest that your children make a list of toys, videos or whatever their heart desires for that month and that they price shop to see how far their kids prepaid credit card funds will go. Tell them to keep any receipts and then just leave them to their own devices. Them using prepaid credit cards for children may be a life lesson may save them much heartache in the future.
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