The benefits of prepaid cards for young people June 16 2009
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In the current economic climate it is vital that financial education begins as early as possible and many parents are embracing tools such as prepaid credit cards to help teach their offspring about the dangers of getting into debt and how to effectively budget.
Chris Reddish, chair of the Prepaid International Forum, states that prepaid cards can be an ideal way to give youngsters some financial independence, while ensuring that they cannot spend more than they own.
"For younger people, prepaid is a safe way of helping them learn about finance and about having financial responsibility but in a managed way, where they don't have a credit risk and the temptation to spend more than they can actually afford. You can only spend what you have. A lot of people use it for budgeting," he comments.
Measures such as this could be increasingly popular, with Natwest's MoneySense panel showing that children are becoming more likely to plan for their financial future and put their pocket money away for a significant purchase, while some youngsters are even saving for higher education.
A report from the Associated Press emphasised that parents wanting to teach their kids about money should give them regular pocket money but rather than dictating what they spend it on give them room to experiment for themselves.
It adds that prepaid credit cards are a good idea as they give youngsters the flexibility to spend their cash online if they wish, with no bank account required.
Prepaid credit cards and student life
Older offspring, such as those attending university, can also benefit from some help keeping their finances in order and once again pay-as-you-go credit cards can prove a useful budgeting tool.
The costs facing students have always been an issue for some and recent reports suggest that an increasing number of university attendees are struggling financially.
A survey by the UK Youth Parliament highlights that 64 per cent of those questioned are concerned about the impact the recession will have on students, with many respondents suggesting it will lead to parents being able to help them less financially, fewer options for part-time holiday and term-time work and less graduate job opportunities when they complete their degree.
With challenges such as this facing them it is no wonder some students are lured in by the temptation of credit cards and overdrafts.
Fairinvestment.co.uk states that prepaid credit cards can help students keep their debt "in check" as they cannot go over the limit they set themselves.
It adds that other advantages of the payment solutions include no interest charges and no late payment fees, despite having all the conveniences of a regular credit card, such as being able to shop online.
Prepaid credit cards on gap years
Students heading off on a gap year can also make use of prepaid credit cards, with many such products offering good exchange rates and giving parents some peace of mind that their globetrotting offspring has access to funds.
"If a child is on a gap year, many people give them dad's credit card if they get in trouble. But giving a prepay card allows them to have an empty piece of plastic that can be topped up if they run short of cash or need funds in an emergency," comments Lewis Findlay, chief executive of Hertford International.
So there are many ways alternative credit solutions such as prepaid credit cards can help young people get a good financial education and escape the debt trap so many of their parents are stuck in!
In-depth feature articles
The benefits of prepaid cards for people shopping online
The benefits of prepaid cards for people with no bank accounts
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