A Prepaid Credit Card Can Teach Your Teen Money Management
If your teen has a prepaid credit card or one that has a low limit, he will have to learn how to put money on the credit card as he gets paid. In the instance of a low limit card, either the balance has to be paid by the due date or a minimum payment has to be paid. This is another part of learning the responsibility of having a credit card.
Before allowing him to apply for a prepaid credit card, even if you are helping him, he should have an income. A part-time job is necessary to have the money to make the payment on his credit card.
If there is no job, there will be no credit card. After all, no one else is paying your credit cards for you, are they? Sometimes you have to be the bad guy whether you want to or not.
Only by teaching your teen the most important things to remember when taking care of his money, will he ever be able to do so for himself.
Prepaid Credit Cards
This may be the best option for your teenager to start out. A certain amount of money will be put on the card. Even though he does not make payments on it, this still teaches that if he does not put money on the card, similar to making payments on a regular credit card, he will not have money available to spend.
By having this money on a credit card, it may not seem as real as having it in his pocket. It is harder to keep track of what is spent and what is left. The result could be very embarrassing when he is in line to pay for something and his credit card is declined. On the other hand, it may teach him to keep better track of what he spends.
The credit card is not the only place money should go. If it is all put on a prepaid credit card, the temptation is there to spend it. However, if only a portion goes to the credit card, some goes to a savings or checking account, and some is kept for spending money, the lesson of budgeting is being learned.
What Your Teen Will Learn
When your teenager has a job, a credit card, and possibly a car, he will feel more like an adult. This is really what you are preparing him for from the beginning. Not only will he be proud of himself, but you will be proud too. Just do not expect him to be perfect. Once in awhile everyone overspends. It is not the end of the world as long as you have given him the basics and he can get back on track.
The main goal is to try to keep it from happening on a regular basis. So do not feel like you have to bail him out every time he makes a mistake. That is another part of growing up. He must learn not only to budget his money, but also the consequences of his actions if he does not stick to the budget.