I must sound like a broken record “If you don’t have the money, you can’t buy it.”  My teen is always asking how much he has in his spending account. He is often downtrodden when it’s not enough to buy something he wants. In our house, there are always opportunities to make money but the hard lesson for my son to grasp is that the money he earns doesn’t all go to spending. We put money in five categories: spending, savings, giving, investing and most recently a sinking fund. Even with that, he often says, “Can’t you just charge it and I’ll pay you back?”

This brings me to my next financial lesson … debt. Since children cannot open their own bank account until they are 18 years old, parents are opting for prepaid debit cards for their teens. These debit cards can be a valuable educational tool and gives teens confidence when managing their savings and spending with the added benefit of a parental safety net.

While cash is historically king, many stores and restaurants have become cashless. These prepaid debit cards are becoming a necessity for teens since it is illegal to give your credit card to your child to use, even for the smallest purchase. You can however add your teen as an authorized user of your credit card. It may behoove you to not give them a physical card or access to the card number but it is also a good way to build their credit history. Be smart about the amount you load onto your teen’s prepaid credit or debit card and check their purchases. Better yet, only load the amount of money they have available for spending.  If it is their money they are most likely to be mindful of what they buy.

I like to think these prepaid debit cards are training wheels for their first credit card and offer a valuable step in their financial education. We live in a plastic world. My sons hardly see cash exchanged at the cash register. They see a credit card swiped, a receipt given and we walk out with our purchase. Fortunately for them, we are credit card savvy and don’t carry debt. However, the lure of using credit is something that intrigues them. Sit down with them and have a heart-to-heart about money. Ask them what they know about credit. What they say may surprise or even shock you!

You know your teen best. There are pros and cons to each card type, so choose with your teen wisely. Does your teen have a healthy respect and understanding of money, interest and savings? While it is advisable to have credit history, it is not good to have bad credit. Advise them to only charge what they can afford and to pay off the balance each month to establish good credit.