The Tools You Need to Successfully Teach Your Kids Money Management

By Odysseas Papadimitriou, CEO of Card Hub, a leading online marketplace for both secured and unsecured credit cards

Consider for a second your financial youth. Did you have someone to teach you not only the value of a hard-earned dollar, but also how to correctly manage all of the dollars you accumulated in order to ensure financial security later in life? Or, was your financial literacy gleaned from a trial by fire?

Judging by the widespread overleveraging and risky lending that led to the Great Recession and the increases in consumer debt that we have seen since the country emerged from it, many of us still don’t have a firm grasp on what it takes to be fiscally responsible. And since we don’t want our children to make the same mistakes we have or endure widespread financial struggles during their adult lives, it’s important that we instill within them at a young age things like the tents of responsible credit use, the basics of investing and lending, and how to plan for retirement.

“Ok,” you might be thinking, “but that’s easier said than done, right?”

Use a Prepaid Card

It sure is, but you need to start somewhere, and that somewhere is a prepaid card, interestingly enough. Prepaid cards have traditionally served two primary purposes: acting as alternatives to traditional checking accounts for people who misused these traditional accounts in the past and helping young people on the road to financial literacy.

Prepaid cards are particularly well-suited to this latter end for a number of reasons, including:

  1. Their similarity to checking accounts: Prepaid cards are essentially checking accounts without the paper checks. Online bill pay, direct deposit, ATM withdrawals and in-store usage are all possible with them, so using one will prepare your child to effectively manage his or her checking later in life.
  2. Their conduciveness to parental involvement: Prepaid cards are tied to online accounts, which parents can monitor and control. This not only allows you to set the amount of money at your child’s disposal, but also review the rights and wrongs of his or her card usage.
  3. Their potential for minor misuse: Prepaid cards often have a variety of small fees that can really add up if a card is used incorrectly. Therefore, you child will have to learn what’ll result in a fee in order to make his or her money last.

Stress Budgeting & Responsibility

Still, a prepaid card itself won’t help your child learn. You need to implement an allowance system to truly hammer home the consequences of wild spending and the need for budgets. While the details of each family’s system will differ, they should all follow this basic framework:

  1. Open a prepaid card and explain its basic features and fees
  2. Load enough money to last your child two weeks
  3. Explain to your child that he or she will have to pay for their own weekend activities (sub in any recurring expense) and that no more money will be provided until the two weeks are up, no matter what
  4. At the end of the two-week period, review you child’s purchases with them
  5. Repeat until you are confident that your son or daughter has mastered the basics
  6. Move to monthly allowances and again repeat

When your child masters prepaid card use, give his or her allowance in cash in order to teach the importance of keeping track of physical money, which obviously cannot be monitored by parents. After that, open a checking account in your child’s name, opt-in for the ability to overdraw the account, and use that as an opportunity to teach the importance of not using money you don’t have. Lastly, co-sign for a college student credit card and teach the tents of managing a credit line and the importance of maintaining a solid credit score.

Each step you take, increase both the amount of the allowance and the number of expenses your child is responsible for. Hopefully, after all of this, your child will be comfortable with the idea of financial independence and will understand how to handle it properly. If you can manage that, you’ll surely have done your job as a parent, and your son or daughter will be way ahead of the game!

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  • Courtney Cabarcas

    That’s how you hog “column inches”. Old sportswriters’ trick for old sportswriters.

  • Money Advisor


    I don’t get it… sorry…