People have to start their financial learning at some point in their lives, and this usually starts when they are children or young teenagers. But what sort of financial products are good for teenagers, if anything at all? One on hand you need to teach them the value of money, but on the other hand they need some form of card or cash in order to start being independent. If you are unsure what type is right for your children, then here is some advice on credit cards for teenagers.
Stay away from normal credit
If you have a child, then you should really stay away from traditional credit cards, because these types of cards do not promote responsible spending. Although a credit card would allow a child to make mistakes about spending and learn from them, simply giving them a line of credit will probably end in disaster. You have no way of stopping them from spending the whole limit in one go, and they are putting you and themselves in debt.
Despite normal credit cards being a bad idea, there is a new type of card on the market that is being targeted at children. These cards are known as prepaid cards, and have most of the facilities of a credit card; except that you put money on the card in the same way you put money on a mobile phone. Instead of giving your child a credit card, you can put a certain amount of money on the card each week or month and then the child can use the card as they see fit.
Benefits of prepaid cards
The main benefit of a prepaid card is that it combines the freedom of having a card with the ability to control spending. This makes it ideal for parents who want to give their children a level of financial responsibility but still have the means to control the amount they spend and on what. By having a card with a statement, the parent can see exactly what their child is spending their money on and when. This is a very useful tool in helping to educate children on money expenditure. Also, prepaid cards are safer than having your child carry around cash, plus it also allows them to make purchases online.
Drawbacks of prepaid cards
Although many believe these cards are better for children than other financial products, there are still question marks over whether they are a good idea. Although they are touted as helping children to learn about finance, this can be done in other ways apart from giving out a card. Also, keeping track of spending is not always easy, as some of the cards allow cash withdrawals, meaning that they could spend their money on anything. Also, there is the danger that parents will put too much money on the cards, which will have the opposite effect on teaching children about money and simply make them believe they can spend what they like. Also, there are fees involved in these cards, such as an application fee and top up fees. Although these cards might be good for some families, you should think carefully about the benefits and drawbacks before deciding on whether or not you want your child to have such a card.