A prepaid card can be a great option for kids just learning the money management ropes.
It’s safer than cash.
It’s smarter than handing over your own credit card.
It’s often cheaper than bank debit cards which have insanely sneaky overdraft fees.
And the more innovative cards include some great educational features — like parent-paid compound interest.
The bottom line: prepaid cards are excellent training wheels for adult-centric banking products like bank debit cards and credit cards.
But what’s the right age range for kids to be using prepaid cards? Data from our family finance site yields some insight.
Check out the chart above. It shows the current age distribution of children using FamZoo cards.
The sweet-spot is near the boundary between middle school and high school. Makes sense.
Some kids start using prepaid cards as early as preschool, but that’s unusual. Usage ramps steadily upward through elementary school and the pre-teen years.
Since most card offerings require the legal cardholder to be at least a teenager, you may be wondering how so many kids in the chart can be under 13. In the pre-teen case, kids use what we call “on behalf of” cards. The parent is the legal cardholder, but the card is dedicated to the child’s financial activity. Here’s how it works.
After the early teen years, usage ramps back down again through the end of high school and into college.
That said, even as older kids transition to traditional bank accounts, many retain their prepaid cards to keep a collar on discretionary spending and coordinate with parents throughout college.
In fact, usage can extend beyond college too. As Monte, a FamZoo reviewer on Facebook, points out: “Not just for children! FamZoo [prepaid cards] have helped my fiance and I use the envelope method for budgeting on hobbies. With a weekly allowance we can save, donate, and spend guilt free money all within a shared budget.”
Whether used as training wheels for youngsters or a budgeting tool for oldsters, prepaid cards are becoming an increasingly familiar fixture in the standard money management toolbox.
Maybe it’s time to get one for your kid.
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