Friday, September 9, 2016

Run A Family Banking System With Prepaid Cards

Prepaid Card For Your Child

Prepaid cards are excellent financial training wheels for your kids. Kids learn the responsibility of managing a real account and a real card without the hassle, risk, or fees of a typical credit card or bank debit card.

The best prepaid card offerings will have:

  • No risk of debt. Unlike a credit card, your kid can’t spend more than what’s on the card.
  • No overdraft fees. Unlike a bank debit card.
  • Subaccounts for kids. This should include web and mobile access with parent visibility and controls.
  • Instant, free transfers between family members. Unlike bank to bank transfers that can take up to 3 days and as much as 3 bucks a pop.
  • Instant lock/unlock card. Comes in handy when a card is lost or stolen, which happens a lot with kids!
  • Instant text alerts for any card activity. And, by the way, the text message should show the remaining balance — a great, simple way for kids to stay on budget.
  • No hassle online ordering and card replacement. No need to visit a physical branch office.
  • FDIC insurance and protection from unauthorized purchases. Yes, good prepaid cards have appropriate protections!

So, once you can find an offering like that, here’s how you set things up:

  • Get one main card for you, the parent. I call mine my Bank Of Dad Card. Load it up every once in awhile from the outside world with a chunk of funds. I load mine with a bank transfer from my checking account.
  • Get sub-cards for your kids. In fact, my kids each have multiple cards for spending, saving, and donating so they learn to bucket their funds.
  • Move money between your main card and your kids’ cards frequently and in smallish amounts. Credits might include a regular allowance, an odd job or chore payment, a parent-funded interest payment to encourage saving, or a reimbursement for a purchase that you’ve decided to cover. And money can move in the other direction back to the parent card too: like a family billing for your kid’s portion of the monthly cell phone plan, or a penalty for blowing off chores, or even a repayment on a Bank of Mom or Dad loan.
  • Periodically reload your parent card from the outside world again when it gets low.

Now you’re running your own little family banking system and family economy with a set of prepaid cards where you control all the knobs and dials and consequences, not the bank.

Once your kids train up and prove themselves in your family banking system, they’ll be ready for the real banking system. Which, as we all know, is a whole lot less forgiving!

P.S. Watch the video here:

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