Parenting Pointers: Using Prepaid Cards to Teach Budgeting

I recently had the chance to do an interview with MasterCard regarding prepaid cards and budgeting (especially for Father's Day).

1.       What makes a prepaid card a good tool for budgeting?

According to Andrew Gillen, Vice President at MasterCard, “One tool that can help with budgeting is a prepaid card.  Prepaid cards can be a really cost-effective option, especially as bank accounts have gotten more expensive. If you don’t have the money on the card, you can’t spend it, unlike a credit card.”

Prepaid cards are good tools for budgeting for a few simple reasons: A. Prepaid cards can be cost-effective especially as traditional bank account fees have become more expensive. B. Unlike credit cards, the money on prepaid cards is already determined. You cannot spend more than you have. Although, prepaid cards can be replenished if additional funds become available. C. No background checks or credit reports are needed to purchase and use prepaid cards. Those who are new to credit or recovering from past mistakes are not at a disadvantage.

2.       Why not just use cash?

Prepaid cards are great alternatives to cash because of convenience and safety.  Prepaid cards are convenient to use because there’s no fumbling with dollars and cents. And prepaid cards can be used when shopping online. Prepaid cards are also safer than cash. If registered, cardholders can recover their balances if cards are lost or stolen.

3.       How can people get prepaid cards?

Prepaid cards are now available almost everywhere – in stores and online. Consumers should talk to their friends to find the cards that are right for them.  Gillen recommends the Western Union ® MoneyWise™ Prepaid MasterCard® as it carries FDIC insurance, MasterCard Zero Liability protection against fraud or loss and it has no monthly fees.

4.       What ages would this budget-learning tactic be good for?

It is never too early or too late to start budgeting – from children receiving allowances to recent graduates with a new jobs. Financial awareness and discipline are important.

Parents will decide what’s best for young children. For example, CNN Money suggests that children should be old enough to count money before receiving an allowance.

With Father’s Day right around the corner, mothers can load funds onto prepaid cards, tell their kids their budgets and let the kids buy gifts for dad. The kids cannot overspend with prepaid cards and moms can track their children’s spending with cards such as the Western Union ® MoneyWise™ Prepaid MasterCard®.