smart spending

Your plan for 12 days of financial gift-giving

Prepaid card
Prepaid card | lovemelovemypic/Shutterstock.com

Prepaid card

On the third day of Christmas, my true love gave to me ... a prepaid card that can be used anywhere, without affecting credit.

In that social netherworld of tweens and early teens where peer pressure to carry plastic can become overwhelming, a prepaid card can serve as a handy relief valve.

"The prepaid card is completely unforgiving; when there is no more money on the card, your child has to stop using it," says Seaman. "If your child doesn't respond to self-direction, if they don't respond to gentle guidance, if they need hard-and-fast boundaries, then the prepaid card is the way to go."

Levine agrees: "Rather than giving your child a weekly or monthly allowance, you could say, 'Here (is) X amount of dollars, and you need to figure out how to make it last,'" she says.

"But it is a mistake to think that a prepaid card helps prepare students for credit cards. It doesn't," she says. "It doesn't involve payments or interest or a credit score. It's not a credit card on training wheels. The similarities between a prepaid card and a credit card are on the spending end, not on the paying-back end. And the spending end is where our kids need the least amount of help."

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