Using Prepaid Credit Cards to Teach Kids about Credit

Using a prepaid credit card can be beneficial in a number of ways. Prepaid credit cards are safer than other payment vehicles and they are just as convenient as a credit card. In addition to being a good option for you individually, they are also a great tool to use for teaching kids about credit. Teaching your children how to handle credit is one of the most important things that you can do as a parent.

Why Teach Children About Credit?

Your credit history is one of the most important things that you have. Many people go out and ruin their credit because they lack knowledge. They go out and get four or five credit cards and max them all out. Then, when something goes wrong, like a job loss, payments are missed. If you default on any of these things or consistently make late payments, your credit could be severely damaged. Many young adults make these mistakes because they did not know any better. 

How to Teach 

Every child should have their own prepaid credit card. You can establish the amount you feel is appropriate. Try small amounts, like $100 or $200 dollars before you invest any larger amounts. Before you give them the card, explain to them what you are doing.

Give them a budget and teach them how and when to use their card. After prolonged use of appropriate spending habits, you can begin to slowly increase the limits. They will learn about money management and financial responsibility.

Be sure to allow them to make their own purchases. If they waste all their money on something frivolous, they will not get any more until the next allowance comes around. This will teach them to handle their money in the proper manner. 

Why Prepaid Cards?

The prepaid credit card is one of the safest ways to teach children. You are not giving them a traditional credit card with which they could rack up a huge balance on. It also comes with the safety features of a regular card as well. If they lose the card, you can always get it back without losing the money. 

Even if the card is stolen, the solution is rather simple. You can simply pick up the phone and give the credit card issuer a call. Let them know that the card has been stolen and needs to be deactivated immediately. They will be able to turn off the card as soon as you verify your identity for them. You can then request that they create a new card and send it to you. You should receive the new card within a few days with the same balance that you had on it when it was stolen or lost. 

This level of security makes prepaid credit cards a superior option to using cash to teach your children about spending. If they lose cash, there is no way that they will be able to get it back. You can rest assured that their money will be protected no matter what happens. 

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