With the Christmas holidays now just a matter of weeks away, parental attention will inevitably be turning to present buying.

If you’re anything like me, and want your children to experience the joys of giving as well as just receiving, you may well be helping your child to save up for some Christmas gifts for them to give out. But whether your child is a first-time piggy bank raider, or a seasoned savings pro, they are likely to want to spend their booty in the coming weeks.

Now that we live in an age of Internet shopping, Black Friday madness and a rapidly-fading interest in cash, you may be considering arming your child with an electronic payment card to use.

If you haven’t heard of this concept before, here are the basics. A number of providers, including MasterCard, Visa and Maestro provide cards that can be “topped up” by an adult and used by the child. Unlike a credit or debit card, they can only spend what is on the card – so they’re more akin to a mobile phone top-up card than a bank card. But, they can be used in largely the same way as a credit or debit card, opening up a whole new world of spending opportunities for children and teenagers.

 

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So, with that in mind, I thought I’d take a look at some of the pros and cons of giving children their own pre-paid card to use.

 

Pro – They help children learn to manage their own money. I can’t guarantee they’ll be any good at this (I certainly wasn’t!) but having a centralised, bank-like place to save up their pocket money can be a great first-step into the world of financial┬áresponsibility.

Con – Are all habits good habits? While they operate in the same way as cash (you can’t spend what you don’t have), you may be of the view that encouraging young children to “stick it on the card” isn’t necessarily best. I personally believe that the act of holding and handing over cash is the best demonstration of spending only what you have saved.

Pro – You can monitor what they spend. Many of the most popular cards come with parental apps for smartphones, allowing curious parents to see exactly what the card is being used for. You can even set spending limits and stop them from being used in certain places.

Con – They aren’t like a savings account. For starters, they don’t allow you to earn interest on your money, so treating them as a good way of “saving” could be a bit misleading.

Pro – They are easy for parents to add money to. I don’t know about you, but I often struggle to find the spare change around the house when it comes to dishing out pocket money – so a direct debit or bank transfer could make that process a whole lot simpler.

Con – They aren’t free. Depending on which card you choose, you may be asked to pay for the card itself (and any replacements!), be charged to add money to it, have to pay a monthly or annual charge for the service and sometimes other charges. Like cash or loathe it, your piggy bank doesn’t usually charge you for its services!

Pro – They’re a safer way of storing money. Sure, you can still lose the card. But the ability to stop/cancel the card once lost is a big advantage over cash, which could be a real win if your child has a habit of misplacing things.

So, as you can see, there are definitely positives and negatives to cards like these. I can definitely see how they would suit older children, and children who are away from home for periods of time – perhaps on a school trip or while boarding.

I don’t think I’ll be arming my little ones with a card quite yet – the plethora of credit cards in my own wallet means I’d quite like them to hold onto their coins for a little while longer. But I’ll certainly be keeping a close eye on the cards available from now on, as it seems inevitable that they’re going to become standard within the next few years.

 

Image sources: goHenry

 

 

 

 
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By Henry Elliss on 20.11.15

Guest Contributor

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