How to teach your teen to budget with plastic

By UK CreditCards.com

Too many of Britain's teenagers don't know how to budget, say experts. A recent study by the AXA Financial Task Force found that a whopping 70% of British teens couldn't manage a household budget for just one week, and yet 44% still intended to apply for credit cards and 18% reckoned they'll go for a loan when they reach 18 years of age.

teen-parent

The study's results are alarming to parents whose teenagers are just starting to learn how to handle money. However, experts say it's possible to safely teach teens to budget -- and manage credit responsibly -- with the right kind of card.  

A safer way to swipe
To give young adults the experience of managing an account without paying interest, experts recommend setting teens up with a prepaid card. Prepaid cards allow young adults to practice paying with plastic without the risk of building up long-term debt. They can also be a convenient way to settle bills and teach your teen to stick to a budget.

Teens can easily keep track of their transactions, and they can access their expense information online, by phone or by text. By regularly reviewing their spending and their card balance, the teenager should learn excellent financial habits for the future, say experts. For example, being able to track where their money has gone may highlight instances where cash may be saved, making it easier for them to get money together for more important use.

Prepaid cards are also excellent for helping teenagers to become used to paying bills when they're due. However, teens can also choose to have a standing order automatically make their regular subscription payments for them.

In addition, some prepaid cards provide valuable peace of mind with free purchase protection. This could prove very handy if a youngster makes purchases from what turns out to be a dodgy website.

Ordering a prepaid card online is quick and easy, and you can often get one delivered to you within three to five days. Acceptance is guaranteed if the primary cardholder is 18 or older and lives in the UK. However, parents with teenagers aged 13 to 17 can set up an account in their name and then set up their son or daughter as an additional cardholder.

See related:The battle of prepaid credit cards: MasterCard vs Visa; 5 questions to ask when comparing prepaid debit cards

Published: 25 July 2011