Prepaid Visa Cards: A Great Way to Teach Your Teen Money Management
According to a 2008 report from the American Savings Education Council and the AARP, only 52% of gen Y members (those born between 1980 and 1988) save money on a regular basis. Additionally, 57% report that they have credit card debt. When parents are raising their teenagers, it’s likely that prepaid cards are the last things that come to mind. However, in light of frightening statistics regarding young adults and their finances, money management needs to be given priority when it comes to raising your children.
With financial institutions crumbling all around us, it’s the perfect time to truly emphasize to your teens just how important and fundamental money management is to their livelihood. Credit cards allow people to live beyond their means. When abused, credit card users encompass this attitude of “buy now, pay later.” It’s reasonable to expect that young adults who’ve either always had things handed to them in life, or who’ve never got what they wanted, would jump at the chance to have a credit card without truly understanding the responsibility that it comes with. Before your teen turns 18 and can obtain a credit card without your consent, try teaching them how to handle their finances with a prepaid Visa card.
Prepaid Visa cards are an excellent way to teach teenagers several valuable lessons, first and foremost, money management. Prepaid cards are a great way to make the correlation between the use of plastic with actual funds available. For instance, if your teen has a summer job, make them place some or all of their earnings on their card and give them the tools to understand how to use the card. There is minimal risk, as there will not be any overdraft fees since you can’t spend more than is on the card. Additionally, as most prepaid cards allow you to keep track of your balance online, use this to force your teen to attach work (money earned) with their budget. Explain to them that if you make X amount of dollars each week, you have X amount to spend for the total month, so spend wisely.
Secondly, prepaid Visa cards force teens to prioritize their purchases. If you’ve been making and spending your own money for years, it would be easy for you to decide between paying for a school loan vs. a new car, however, if you’ve never had to weigh the pros and cons of a purchase, it can be a daunting task. Prepaid Visa cards solidify the tie between the funds teens have (or have worked for) and how they should spend them. For instance, let’s say your teen comes to you and wants an Xbox, but prom is right around the corner and he needs a tux and wants to rent a limo with his friends. For an adult, this would be a lighthearted and easy decision, but for a teen, this is a fundamental stepping stone to bigger financial decisions. This forces teenagers to see that sometimes they have to make a choice between two options, as opposed to a credit card, where the need for a choice may not be as clear. Teens with credit cards often get themselves in financial debt by spending more than what they have.
While managing finances is only part of the numerous life lessons parents have to teach their teens as they grow up, it’s an important one, and one that seems to get overlooked on too many occasions. Taking simple steps to teach your teenager about money management before they turn 18 will highly benefit them in the long run. You can’t always be around to advise your children, so instill in them the logic they will need to stay out of debt and make the right financial decisions as they grow up.
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