In this modern age of technology and digital payments, pocket money seems somewhat old fashioned.
But giving your kids a credit card is a disaster waiting to happen. It seems a happy medium is needed. And that happy medium comes in the form of prepaid cards.
So, what are they?
Prepaid cards are a type of debit card where you decide how much there is available to spend by uploading funds onto it.
How do they work?
After paying a set-up fee to take out a prepaid card you simply transfer money, online or at a bank, from your account to the prepaid card.
What’s good about them?
Parents want to be able to control how much their youngsters spend. Back in the day that involved giving them pocket money but for many teenagers these days – with so much spending done online – that’s not always an efficient or effective method.
Rather than giving them a credit card or access to a bank account, which let’s face it would take an almighty amount of trust, by giving them a prepaid card you can control their spending.
And, as they are either VISA or MasterCards, they can be used almost anywhere in the world.
What’s not?
The fees involved to set up the card, manage it monthly or make withdrawals (and in some cases transactions) mean you’re effectively paying a middleman to give your children your own money.
What are the best cards on the market today?
Not all prepaid cards are available to the under 18s. When it comes to providers that do cater for the younger generation Virgin leads the way.
The Virgin Prepaid Pay Monthly card is available to anyone 13 or over. It has a £9.95 set up fee and a £4.75 monthly fee. There is no transaction fee but you will pay £1.50 each time you make a withdrawal from a cash machine.
If you don’t want to pay a monthly fee you should opt for the Virgin Prepaid Pay As You Go card. It has a £9.95 set-up fee and no monthly fee. But both the transaction fee and the ATM withdrawal fee are 2.95% – so this card is best if your kids will only be using it every once in a while.
Both cards allow you to upload cash from your debit card for free.
Very good article highlighting the need to teach youngsters the art of money management, just one of the many benefits prepaid cards have in todays financial world.
Good article. I like the idea of being able to provide an under-18 with a pre-paid card but the fees seem far too excessive. At this cost, it’s not a realistic option.
If you want to give your kids more freedom and responsibility, whilst keeping a rein on them, it would be better to set up a current account in their name. Most major banks have under-18 accounts. For instance, Lloyds have an 11-18 year old banking product. This offers in-credit banking and a free debit card. Your kids can use the debit card just like a prepaid card, and their spend will be limited to the balance in their current account.