How To Really Teach Teens About Money

In light of the horrible idea by the Kardashian sisters to give financial advice to parents and teens through a prepaid credit card complete with exorbitant fees and a rather generous shot of the sisters on the front, I thought I’d take the opportunity to give some alternative advice to you parents out there that want to teach your teens about money.

I now bank with USAA and highly recommend their services. They have several options for parents that want to open an account for their teen. Let’s take a look at these options and how they can help parents. Most legitimate banks and credit unions have similar options.

A prepaid card (without celebrities on the front) is a great teaching tool

USAA has a prepaid credit/debit card available for teens. There are no fees associated with the card. It can be used exactly like your own debit or credit card.

With these prepaid cards you can manage spending limits for your teens and view their transactions. You can also set up an allowance schedule if you would like a pre-set amount be credited to the card at a set interval. Adding money to the card is instant and can be done any time from the USAA website.

Why this is a good idea

If you take the time and discuss how the card works with your teen and set up the spending limits and deposit schedule with them, they will know how they should use the card, how much money is there, how to track their spending and will be on the way towards a financially savvy future.

These cards, like any other tool, are just a vehicle for lessons and you still have to take the time to teach your kids about saving and tracking their spending. If your teen is younger and has no clue, this is a great place to start.

Set up a teen checking account

While the above prepaid cards are a great start for a teen, they lack some of the additional feature that a full-fledged teen checking account have such as the ability to write checks, pay bills, transfer money to a savings account and use ATMs to withdraw cash.

Like the prepaid card, you as the parent would still have full control and access to your teens account but with a teen checking account, the account itself has less restrictions than a prepaid card. You don’t have the ability to set up spending limits in the same way you do with the prepaid card and your teen would have a bit more freedom over how they spend and manage their money.

The benefit of the account over the prepaid card though is that a teen checking account would give your teen complete real world training while you look over their shoulder to make sure they don’t screw up. They would get all the benefits of a regular checking account such as debit rewards, interest, overdraft protection, automatic transfers and the ability to create a savings plan with an attached savings account. This is the best way for a teen to learn to manage their own money because they would actually be doing it.

What to look for and look out for with teen products

Before you get started, you should have a good idea what level of financial knowledge your teen already has because there are tons of products out there that you can choose from to help your teen learn about money, aside from those I mentioned here, and you need to know exactly what you are looking for to find what you need.

Just like your own banking products, teen accounts shouldn’t have any fees associated. Look for a prepaid card with no fees and free parental tracking tools. As for teen checking, look at the teen accounts as if you are looking for a new account for yourself; it should be free of fees, offer rewards, checks, debit cards, online access and free BillPay.

As your teen gets older and more responsible, you will want to step out of the way and let them make their own decisions so check if the teen account can be graduated into a full-fledged account.

As with any good and helpful product on the market, someone else is out to profit from it like the Kardashians sought to do with prepaid cards. Prepaid cards and similar products really can be used as training wheels for your teen as they start dealing with money, but an aggressive fee structure will cripple any of the benefits of the product.

What methods do you use to teach your teens about money?

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12 People have left comments on this post

» MoneyConeNo Gravatar said: { Dec 6, 2010 - 09:12:02 }

I think this is a great idea! Thanks for the tip!

Does USAA have something similar for adults – say one wants to stay within budget (especially this holiday season!) – a good way to force this discipline would be to get a prepaid card. I wonder if there USAA and other good banks have anything…

Jesse MichelsenNo Gravatar Reply:

No problem!

AS far as a prepaid card for adults, you can use the teenage prepaid cards without issue, there is no age restriction on them. You can also get prepaid visa/mastercards at the grocery store in the gift card area although these do have a one-time fee to activate them. Most other banks also offer prepaid cards so check with your bank to see if they have one free of fees.

» getdebitNo Gravatar said: { Dec 6, 2010 - 07:12:06 }

Great suggestions — although not everyone has access to the amazing features and service provided by USAA, there are definitely comparable teen bank accounts offered by most of the large banks. While some of the prepaid debit cards aimed at teens can be a good deal (and can provide good control to the parents), there are also plenty of duds (like the kardashian kard).

Jesse MichelsenNo Gravatar Reply:

getdebit, my wife still isn’t happy about our change to USAA only because it’s a pain to change things and get used to something new. If you are referring to their exclusivity to military, they actually lifted that this year and ANYONE can have an account with USAA (you just can’t get insurance of any kind through them) so if you are unhappy with your bank, be sure to check them out and see if they will work for you.

But you’re right, tons of banks have teen geared accounts, just watch out for those duds.

» Kevin @ Thousandaire.comNo Gravatar said: { Dec 8, 2010 - 08:12:55 }

I’ve never heard anything bad about USAA. I need to find a way to get involved (my dad was in the military). And this is a much better way to teach kids than a stupid celebrity card

Jesse MichelsenNo Gravatar Reply:

Kevin, they are pretty great. Their customer service is by far the best I have ever dealt with from ANY company.

This year USAA lifted the restrictions so that anyone can have an account with them, you just can’t have insurance through them which is the service that got USAA started haha. But if you dad was military, go sign up for a full-fledged account! You may need some info from your dad, but the insurance rates are unbelievable and I’m pretty upset I can’t get in on them (still working on it though!)

» Joe PlemonNo Gravatar said: { Dec 8, 2010 - 09:12:43 }

Great tips. I especially love the concept of the checking account for a teen. They will be forced to learn how to balance the account, how to make deposits, etc…basically learn to handle money responsibly. When Dave Ramsey’s teen age daughter wrote a check that bounced, he made her go to the bank and personally apologize. A bit over the top? Maybe, but she never bounced another check.

Jesse MichelsenNo Gravatar Reply:

Joe, exactly, the best thing anyone can do for their financial future is get involved today! Even if you are only a teen, there are things to be learned and practiced.

I’ve never heard that about Ramsey but that’s awesome! My parents just told me they had never bounced a check before and that was enough for me to want to stay on track. It only takes one lesson like that to get the point across though.

» Frans @ LenenNo Gravatar said: { Dec 12, 2010 - 06:12:20 }

I think it is good to learn teens how to handle money responsible. You should start by giving your child pocket money, and learn them that if your expenses are higher than your income, you’re doing something wrong. I live in the Netherlands, and we have an orginazation called NIBUD. They teach teens (and even adults 😉 ) how to handle money.

Jesse MichelsenNo Gravatar Reply:

That’s pretty cool there is such as organization there. Money should really be mandatory curriculum in the education system.

» DIY InvestorNo Gravatar said: { Dec 12, 2010 - 07:12:37 }

Great post. I linked to it in hopes that my readers will take advantage of your advice.

Jesse MichelsenNo Gravatar Reply:

Thanks for the link, I hope it helps someone.

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