Opinions on Prepaid Debit Cards

[huffydeb2003]

My daughter is 15 and she has a part-time job. Currently, she is saving 75% of her paycheck for a car in an online savings account. The other 25% is her spending money. I wanted to get some ideas about what others think about putting funds on a prepaid debit card to help her learn how to budget the money. I understand there are some maintenance fees and other fees associated with these cards, so I didn't know if it would be a good idea.

Thanks!

[safari]

Young Americans Bank offers checking accounts for children 12+. You can also apply for a debit card that will be linked to that account for $12 annual fee. More information here.

[dardhel]

IMHO she should split her money between a checking and a savings account. You can find checking accounts with debit cards and no maint fee.

[safari]

Originally Posted by dardhel

IMHO she should split her money between a checking and a savings account. You can find checking accounts with debit cards and no maint fee.

Not many banks would open a checking account for a 15 year old.

[disneysteve]

Originally Posted by huffydeb2003

I wanted to get some ideas about what others think about putting funds on a prepaid debit card to help her learn how to budget the money

How will the prepaid card teach her to budget? Let's assume she gets paid every other week, so she already must understand that whatever spending money she has from one check needs to last until she gets the next check. That's budgeting right there. I'm not sure how having the money on a debit card vs. having it in cash will change how she budgets it. In fact, I think it is easier to budget if you have the cash in hand. That way, she doesn't have to keep track of what is left on the card. She can look in her purse and see what's left. That's much more concrete, especially at that age.

BTW, I think it is great that she is putting away 75% to savings.

[safari]

Originally Posted by disneysteve

How will the prepaid card teach her to budget? Let's assume she gets paid every other week, so she already must understand that whatever spending money she has from one check needs to last until she gets the next check. That's budgeting right there. I'm not sure how having the money on a debit card vs. having it in cash will change how she budgets it. In fact, I think it is easier to budget if you have the cash in hand. That way, she doesn't have to keep track of what is left on the card. She can look in her purse and see what's left. That's much more concrete, especially at that age.

BTW, I think it is great that she is putting away 75% to savings.

I think the idea is to teach her how to balance on paper without carrying around cash. It will prepare her for adult life and will come in handy when she starts college in a few years.

[huffydeb2003]

Originally Posted by safari

I think the idea is to teach her how to balance on paper without carrying around cash. It will prepare her for adult life and will come in handy when she starts college in a few years.

Yes, that is the idea here. She sees how I am able to budget my money using a debit card. I am trying to teach here that it is much easier IMO than carrying cash.

[bjl584]

I think that this tactic may work as long as you explain to her up front that there will be X amount placed on her card per week, month, whatever, and when it is gone it is gone. If she runs out of money half way through, you have to stick to your guns and not give her anymore money. That would defeat the purpose of trying to teach her how to budget a fixed amount of money in a fixed time span. If she does happen to run out of money, and you refuse to give her more to help out, then I have a feeling that that will be the moment that she has her moment of clarity as far as budgeting goes. She probably won't make the same mistake twice, and will learn an important lesson about finances at the same time.

[anonymous_saver]

I would probably just hold off on the card, I see it as wasted money. If you'd like, you could possibly require her to hand over the receipts she gets from her spending money (possibly you could even have her balance it in Excel or something), until she is 18. Then she could go and get herself a checking account in addition to the online savings account.