This article is part of a series on Teaching Kids About Money.
Credit cards have a bad reputation. People view credit cards as an evil doorway to the downward spiral of debt. The truth is, we should all have credit cards. Sure they’re capable of ruining our credit, but ultimately their purpose is to help our credit. The evils of credit cards really falls upon the cardholder and miseducation. One way we can introduce children to using credit cards responsibly is by providing them with Prepaid Credit Cards, where the amount you place in the card is up to you.
Prepaid credit cards don’t necessarily help your credit, though there are ways (e.g. AccountNow Prepaid Visa or MasterCard, The Public Savings Bank Secured Visa, etc.), it’s mainly a great tool to help teach kids how to use credit cards responsibly.
Here are some suggestions on how to teach kids about money management with Prepard Credit Cards (with the help from Little Eddie):
- When you give the prepaid credit card to Little Eddie, make sure you present him with a specified amount of time the amount of the card should last. For example, you can place $50 on the card and tell Little Eddie you won’t re-fill it for three months.
- Along with the tip above, you can even add an incentive for Little Eddie to not spend a percentage of his money within the alotted timeframe. So, if you chose to make the percentage 50%, and Little Eddie only spent $25 of his prepaid credit card after three months, then your next refill won’t be $50, but $51 instead. And if Little Eddie is able to stay within his 50% limit, then you’ll re-fill his card with $52 instead. This will teach Little Eddie the benefits of compound interest.
- On the contrary to the above tip, if Little Eddie uses up all his funds within a month (with no good reason), then you can reduce the amount you’re going to provide him during the next re-fill period. This will teach him to be more money conscious.
- You should also make it Little Eddie’s responsibility to approach you to get the re-fill. Providing him with a grace period of one week or ten days to do so. If he doesn’t approach you within the grace period, you can again deduct $1 from their re-fill amount. This will teach Little Eddie to be more responsible with time and simulates the idea of credit card late fees.
Do you have any additional ideas on leveraging Prepaid Credit Cards to help teach kids about money management?
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I was watching CNN recently and one of the topics for discussion was related to how an elementary school in Chicago, Ariel Elementary Community Academy, has integrated money management for kids into their curriculum. The moment I heard about this, I was immediately captivated. I have been meaning to write about this topic for quite some time now, but just never got around to it. So, thanks to CNN, I have become re-inspired.
Ever since I read the book, Rich Dad, Poor Dad, I have always felt that we don’t do enough to teach kids about money. There are so many adults who could have benefited from this type of education, if only they were introduced to it at an early age. I must admit, not even I was taught anything about managing money as a child. When I got a hold of money, I would immediately spend it on candy and toys. I think back and wonder what I could do with the money I squandered. Think for a minute about how much you could have now, if you just saved 10% of all the money ever given to you.
Well, no reason to dwell on the past any longer! The best we can do is to make sure the children we influence learn from our mistakes. In the coming weeks, I will have a series of articles on how we can teach kids about money management.
How many of you out there wished you were better educated on money management at an early age?
You may have heard that the new Credit Card Act of 2009 has been passed by the government to help regulate credit cards more closely. But what is it exactly and what does it mean to you? Hopefully, this brief article will help shed some light on this topic and answer your questions.
The CARD Act was passed on Monday, February 22nd. Simply put, this act is supposed to protect the consumer. Some of the ways it protects the card holder is by requiring banks to provide important information in a timely manner:
- 45 days notice must be provided to the card holder for significant changes to the terms of their cards
- The bill must be provided to the card holder at least 21 days before payment is due.
- The bill will provide additional information, such as how long it will take to pay off your balance if you continue to only pay the minimum balance due
- The bill will also provide information on how much you need to pay per month in order to pay off the bill in three (3) years
Interest rates are protected for the first year
- Your credit card company now cannot increase your interest rate for the first year after you open an account
- After the first 12 months, rate increases can apply only to new charges.
- You won’t get an increase for late payments that are within 60 days of the due date or for late payments to other creditors.
- Balances with multiple interest rates, any payment above the minimum payment required must generally be applied to the balance with the highest interest rate.
- Read More about interest rate terms here
Students are less preyed upon:
- People under the age of 21 will either need a co-signer or evidence that they have enough income to make monthly payments.
- Card companies can no longer market cards on college campuses.
- Read more here about how Students are affected
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