When my oldest child turned 16, I made two financial moves. I opened a joint checking account with her name and mine on it. And I put her as an authorized signer on a prepaid credit card I didn’t use.
Why? Because I wanted her to have firsthand experience of adult financial management while still under my roof.
After my husband and I got into over $60,000 in consumer debt, I made the decision that I’d teach our kids not to repeat our mistakes. As a homeschooling family, it was convenient to put personal finance teachings into our school routine. But any education choice leaves room for teaching personal finance to kids.
Talking about the perils of debt and sharing our experience of having overwhelming debt with our kids helped a lot. And I’d talk about the importance of saving money along with the many options for earning extra cash.
Those teaching points were good, but we all know that actually living in adulthood is different than watching from the sidelines.
So, I wanted my daughter to get some real-life experience regarding using checking accounts and credit cards.
Table of Contents
- Using Prepaid Credit Cards to Teach
- Why Should I Consider a Prepaid Card or Debit Card for My Child?
- More Money Management Tips for Kids
Using Prepaid Credit Cards to Teach
Getting a prepaid card and a debit card gave her the view of money from both vantage points. I had her use the credit card for larger purchases and use the debit card for everyday purchases. I even let her accumulate “debt” (via a prepaid credit card) when she wanted to purchase a new computer.
Why? So she wouldn’t be afraid of debt, but instead, learn how to handle it responsibly. She now has a healthy view of debt and how to avoid it by paying cash. She also knows how to get it paid off quickly if she accumulates debt.
Using a prepaid card for purchases instead of an actual credit card helped her to learn without accumulating actual debt. And having her learn as a minor helped prepare her for the credit card offers she receives as an adult.
Luckily, there are a few financial companies that will allow kids to get debit cards and prepaid credit cards. These types of tools can be a great way to help your child learn about handling money while living at home.
You can use them to prepare kids for the financial temptations and money management issues they’ll face as adults. That way you’ll give them a boost forward for when they’re on their own and handling money without your supervision.
Here’s a list of some of the more well-known debit cards and prepaid card that allow minors to apply. You as a parent will need to be a joint owner on the cards you obtain for your minor child. However, having the cards will still allow your kids to get the experience of being a credit or debit card owner.
Check out the list below and see which option will work best for helping to teach minors to manage money.
1. FamZoo Prepaid Mastercard
The FamZoo prepaid cards were set up for the sole purpose of helping kids learn good money management skills.
The company’s prepaid card offers the following features:
- Free card reloads (when you direct deposit money – retailer reloads will cost you)
- Free ATM visits
- Monthly fees as low as $0.63 per month depending on the number of cards you have and the subscription you choose
- No per-purchase fees
The FamZoo card can be opened for any age child – from preschool on up. However, kids under 13 will have “on-behalf” cards where the parent is the legal cardholder.
Kids age 13 and up (and their parents) will need to go through an easy verification process to be approved. And all FamZoo accounts must have at least one parent as an account cardholder.
All activity on the cards can be tracked digitally, meaning kids can see where they’re spending their money. And parents have access to each cardholder’s card activity at any time.
GoHenry is a family banking tool that helps you teach your kids how to handle money. Here’s how it works:
You start by opening a bank account in your (the parent’s) name. The “parent” account is a control center for up to four “child” accounts. You put money into the parent account by transferring it from your main bank account.
As the parent, you can transfer money into each child account as you wish. You can set up regular, automated transfers, or you can make random transfers.
This is a nice feature because you can use it to teach your kids the concept of “work equals pay”. For instance, you can transfer $5 into a child’s account when they complete a pay-worthy chore.
Each child gets a debit card to spend the money you’ve transferred into their account.
Other features of the GoHenry debit card include:
- The ability to set single and weekly spending limits
- Choose where the card can be used (ex. at ATMs, online or in-store)
- Block and unblock cards with the touch of a button
- Receive real-time notification of purchases/expenditures
You can try GoHenry for 30 days for free. After that, it costs just $3.99 per month per child. And you can cancel your membership anytime.
3. American Express Serve Family of Cards
The American Express Serve card has three card options. Which one works best for you depends on your teen’s usage and spending habits. We’ll outline the features and fees of all three here.
American Express Serve Basic
The Basic American Express Serve card is Amex’s most popular prepaid debt card.
Here’s a list of the features that come with the card:
- Free Early Direct Deposit. This American Express feature that allows you to receive availability to Direct Deposit funds up to two full days earlier.
- Free online bill pay.
- Free ATM withdrawals (at Money Pass ATMs).
- Cash reload prices of up to $3.95 per load (price varies by retailer).
- A monthly fee of $1, or $0 when you Direct Deposit $500 or more during each statement period.
American Express Serve Free Reloads
The American Express Serve Free Reloads card is best for those who add frequent reloads onto their card. Here are some of the other features of this card.
- A monthly fee of $4.95 (no fee in TX, VT or NY)
- Free online bill pay
- Free ATM withdrawals (At Money Pass ATMs)
- Free reloads
If you find your teen is needing to reload their card with money often, this might be the best choice for you.
American Express Serve Cash Back
The American Express Serve Cash Back card is likely most beneficial for bigger spenders.
Here are some of this card’s features:
- A monthly fee of $5.95
- Free online bill pay
- Free ATM withdrawals (at Money Pass ATMs)
- Cash reload prices of up to $3.95 per load (price varies by retailer)
- Unlimited cash back of 1% on all purchases
So, depending on what the spending habits are of your kid, you have three American Express cards to choose from.
4. TD Go Prepaid Visa
The TD Go Prepaid Visa is a product of TD Bank. TD Bank uses the Visa Buxx prepaid card for teens. Here are some of the features of the TD Go prepaid card for teens.
- A $0 monthly service fee
- A $0 purchase fee
- Free ATM usage in-network
- $1 for card reloads
- $2.50 per month for inactivity (after 12 months with no transactions)
This is a very affordable option for teens and parents alike. Parents can also set up email notification to keep abreast of card balances and expenditures.
5. Capital One MONEY Card
Capital One’s MONEY account is a checking account created especially for teens. And it comes with a MONEY debit card to help your teen learn how to live within a budget.
Here are some of the features of Capital One’s MONEY account for teens.
- No monthly fee charged to this account
- No minimum balance for the account
- No monthly charge to have a debit card
- Fee free ATM usage at participating ATM locations
- .25% interest paid on all checking account balances
The great thing about the MONEY checking account and coordinating debit card is that it gives teens freedom. However, it also gives you as their parent the same access to their checking account that they have.
This way you can monitor transactions and account balances so you can help your teen learn healthy money management skills.
6. Akimbo Prepaid Mastercard
The Akimbo Prepaid Mastercard lets you create a prepaid account for nearly any purpose. You can use it for your grocery budget, your entertainment budget, or your kid’s allowance budget.
Here are some of the features of the Akimbo prepaid card.
- No fees for purchase transactions
- $0.99 fee for purchases requiring PIN usage
- ATM cash withdrawal fee $1.98
There are some great benefits to the Akimbo prepaid card but you may find the others more beneficial and cost effective.
Now that we’ve talked about some of the best prepaid cards and debit cards, here is some more useful information. Let’s talk a bit about why you might want to consider getting a prepaid or debit card for your teen.
Why Should I Consider a Prepaid Card or Debit Card for My Child?
You might be wondering why you should consider getting a prepaid card or debit card for your minor child. While we at Well Kept Wallet don’t advocate carrying monthly credit card balances, we do believe it’s important to help your child learn to navigate the world of credit and spending.
A prepaid card can help him or her to do just that. When your child has a prepaid card or a debit card, they can spend money electronically. Like it or not, the electronic world of financial management is here to stay.
And that electronic spending world does have its benefits, especially for parents whose kids are learning about money. Prepaid cards and debit cards can help your child learn about money while helping you keep an eye on their spending.
Electronic money management helps people see where every dime they earn goes each month. And that knowledge can be a valuable tool in the world of adult money management.
Prepaid Cards and Debit Cards Help Put Limits on Spending
One nice thing about these types of cards is that they allow you to impose a spending limit for your child. An unrestrained budget in the hands of a teen can give them the illusion that money will always be there.
However, with prepaid cards you can make a rule that you’ll put X dollars in your child’s account each month. This spending limit will help them to learn to live in real life where one’s money supply isn’t endless.
It will help them learn that they need to make choices about how they spend their money. If their monthly cash allowance runs dry, they can learn what happens when money runs out before month’s end.
Prepaid Cards and Debit Cards Give You a Birdseye View
Adding to that, prepaid cards and debit cards let you see every one of your child’s purchases. This benefit makes way for conversations about value-based spending. Simply put, value-based spending means spending your money on the things that matter most to you.
As your child sees their spending habits at a glance, they can learn to identify important vs. non-important purchases. For instance, they might decide that a trip to the movies with friends is a value-based spending choice. Conversely, they might decide that daily trips to the fast food drive thru are not important.
As they (and you) get that birdseye view of monthly spending choices, they’ll learn an important truth. They’ll learn that they need to decide which spending choices help them make the most out of life. They’ll also learn that some spending choices simply waste their money.
This type of financial management training can help your child develop wise money management habits in adulthood.
Prepaid debit and credit cards may not be for every child, but they can do wonders for one’s financial education. Consider prepaid cards and other financial education tools as you raise your young ones.
Prepare them for a life of financial responsibility and security made by their own hands – with some help from you.
More Money Management Tips for Kids
Learning to successfully use a debit or prepaid credit card is only the beginning of your kids learning money management. Here are seven other tips you may want to teach your kids regarding good financial management.
Work Equals Money
Too many kids think that the way to get money is simply to ask their parents. It can be helpful to teach kids from a young age that money comes from work.
I’m not necessarily talking about getting a job. Although getting a job can be great for some kids, it can be a burden for others. Learning to manage school and home responsibilities should come first.
But the work equals money lesson can easily be taught at home. For instance, you can give your child a list of chores he/she can do for pay.
If you give them a reason to want to earn money via work you’ll do them one better. In our house we never bought my kids things they wanted “just because”. They could save “want” items for birthday or Christmas gift lists, or they could earn money to buy those items.
As a result, my kids rarely ask me to buy them things that aren’t necessities. Instead, they say “Mom, how can I earn some money to buy X?”
They know that work equals money, and that money is needed to buy thing. Therefore, they don’t come to me for money unless it’s a necessity item. Or, they wait and put “wants” on their gift lists.
Good Things Come to Those Who Wait
Today’s world revolves around instant gratification. Don’t believe me? Just take your kids out to eat at a sit-down restaurant to eat. It probably won’t be long before they start wondering why the order is taking so long to arrive.
Since so many of the things we want can be accessed immediately, teaching kids patience regarding money is important.
In the real world we have to wait before we get our paycheck. Therefore, kids should learn to wait until they save money before making purchases. If you teach kids to save and pay cash instead of borrowing for stuff, you’ll teach the value of patience.
Treat Your Savings Like a Bill
So many people fail to save money because they wait until after they pay the bills to save. If you wait to save until after you pay bills, you have a much higher chance of not saving anything.
Instead, treat your savings like a bill and pay yourself first. Designate a specific amount of each paycheck and put that amount on your budget line. Transfer it directly to savings after you get paid. Then commit not to touch the money except for designated purposes.
Track Your Spending
Spend tracking was absolutely eye-opening for me. I had no idea where my money was going each month until I started spend tracking. I wrote down every dime I spent and continue to do so today.
This meticulous tracking helps me to be able to look back over the month and see wasteful spending. It also helps me nip overspending in the bud before it becomes a serious problem.
Put Aside Money to Give Away
Charitable giving is important in that it can teach kids to be empathetic toward others. It also helps kids not to become too attached to their money.
Help your kids identify causes that are important to them so they can give money to those less fortunate. Their passion might be feeding the homeless or sending money to overseas orphanages.
Teaching your kids to give helps them to see a world outside of themselves. It also helps them learn that money is a tool that can make the world a better place.
Save for Big Purchases
Loans for cars, houses and other big-ticket items abound in today’s advertising world. However, it’s entirely possible to save and pay cash for these types of purchases.
Imagine saving to pay cash for a new-to-you car. Or saving like a rock star for five years and paying cash for a house. Paying cash for big purchases really can be a reality.
For instance, if you want a car, you can save $500 a month for 20 months and buy a $10,000 car. Or you can save $4,000 a month for five years and pay cash for a $230,000 house (plus closing costs).
Society is trained to borrow for bigger purchase but paying cash for them can be a reality with some effort. Teach your kids this truth early on and they’ll get use to expecting to pay cash for big purchases.
Imagine the money they’ll save when they don’t have to pay interest on a mortgage loan. Just teaching them the numbers alone should encourage them to save for big purchases.
Learn About Investing
Investing your money is a viable way to earn more interest than you would by saving at a bank. There are three main ways the wealthy earn through investing:
- Investing in the stock market
- Investing in real estate
- Investing in business
Many successful entrepreneurs have made money in these three markets – and lost money as well. Investing money isn’t a guaranteed win and money can be lost – especially if you’re uneducated in the market.
Help your kids research all that they can about the types of investing that appeal most to them. Have them read books on stock market investing by Warren Buffett.
Or have them read books on real estate investing by John Schaub. Teach them that investing can multiply wealth if you understand how to invest wisely.
Teach them about blue chip stocks and show them time charts of stock growth. Worried because you don’t personally know enough about investing? Learn together with your child and talk about potential pros and cons of each investment method.
Who knows: what you learn might change your finances for the better as well as your child’s finances.
Have an Emergency Fund
Ah, the all-important emergency fund. The emergency fund has saved many people from financial distress.
How many times have you been blindsided with a huge financial hit like needing a new furnace? We’ve all been in those situations where a large, unexpected bill comes out of nowhere.
Those unexpected expenses can take you down financially, or they can be a blip on the radar. If you don’t have an emergency fund you can be facing a large credit card payment for a long time.
If you do have an emergency fund you simply pay the bill, move on and build your fund back up. It may take some time to do that, but at least you’re not tied to monthly credit card payments.
As your child gets older, it’s important to teach them the value in having an emergency fund. They’ll find the presence of one especially helpful as they start owning cars and other expensive items.
You could always make a small emergency fund mandatory before your underage teen gets a car too. Then they’ll be forced to see the value in having one.
Helping your kids learn good money management skills is a must in today’s world. When they learn to properly manage cash through the use of prepaid cards and debit cards, life becomes easier.
And when they use the other financial management tips shared here, they’ve got tools to make money management fun.
Have you or would you consider a prepaid credit card or debit card for your child? If so, why or why not? Share your thoughts and experiences in the comments below.