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Kids learning the difference between debit and credit cards

By Debit card, Educating

The piggybank is usually how children are introduced to money. The jar becomes heavier and heavier with coins till one day it is broken open to reveal its treasures. Welcome to Savings 101.

Romantic as that sounds, it is a hopelessly out-dated way to teach children how to handle money – unless you want them stuffing their mattress with notes once they grow up. Much better, get a kid’s debit card instead and teach them how to manage ‘plastic’ money from an early age.

Debit cards and credits cards are the two primary means of payment today; and though they look similar they couldn’t be any more different. That’s why first time credit card users are so often lured into a ‘credit trap’, as they struggle to manage the seemingly endless piggybank that it seems to be.

Reminding ourselves of the differences between a debit and credit card

It’s not just kids who need to learn about debit cards vs. credit cards. As adults we have become so accustomed to whipping out the “Visa” or “Mastercard” or “Amex” we too have forgotten that using a credit card is not actually spending our own money. Here’s a quick refresher on the basics of a debit card and credit cards:

Debit cards – Linked directly to a savings or checking account; money is withdrawn directly from the account for transactions; you can spend only as much as is available in the account.

Credit cards – Withdrawals and spending are a ‘borrowing’ against a line of credit; you can spend up to your credit limit; it has no correlation with how much money you have in the bank.

Why kids need to learn the difference between a debit and credit card

For a child learning to distinguish between the two is the first step to financial maturity. For parents, too, it can mean fewer surprises in their credit card bills – though getting a SpendSafe debit card for their 12 year old will achieve the same thing.

Spend what you have – Debit cards let children spend up to what they have and no more. The first “Payment Declined” message may be embarrassing but it teaches them to manage their spending better.

Parents not picking up the tab – A parent’s credit card seems like an endless well of money to a kid. Giving them ‘unlimited’ spending power (when you quietly pay the statement at the end of the month) hurts their ability to weigh-up the value of purchases.

No unexpected fees – Credit cards have fees and interest rates attached to almost everything. Didn’t pay your statement balance? Pay monthly fees. Did you withdraw cash with a credit card – there’s a cash transaction fee for that. Debit cards have far fewer fees and a far more transparent fee structure.

Same convenience – Debit cards and credit cards are accepted at virtually all the same places. In fact, parents can reload the SpendSafe debit card in a pinch so you know your child is never without money.

Educate and empower your child for the financial future of today. Kids’ debit cards offer a safe space for children to learn to spend on their own and manage their own money. With the parental controls we offer, the SpendSafe debit card is even suitable for kids under 12 years old!

 

Try out SpendSafe and register for a personalized debit card for your child today.

Monitor spending | Set spending limits | Reload the card instantly

children don’t need to carry cash

5 reasons why you should get a prepaid card for your kids

By Debit card, Educating

Nowadays parents wish to see their children excel in their professional and personal lives and also become financially independent as soon as they can. In modern times, the higher the person’s financial literacy, the higher their chances of success.

In fact, financial literacy is very important on the personal front too as the cost of living is rising in cities globally; and with that comes the issue of managing your personal & professional finances. The good thing is, you can give your kids a head-start.

Financial literacy doesn’t necessarily mean that you have to pull-out a list of the best business schools in the country or asking your kids to invest your money in the stock market; no, it simply means to familiarize them with the idea of money management, and you can start right from the comfort of your home by getting them a prepaid debit card.

Prepaid debit cards, as the name suggests, require you to pre-load money onto a card. In addition to that, certain platforms such as SpendSafe even allow you to set tasks for your children, thereby developing a strong work ethic in them right from a tender age.

In addition to that, prepaid cards for kids are also a great idea for the following reasons:

  • Offers you convenience and control: With prepaid cards and platforms such as SpendSafe you can monitor your child’s spending activities right from your mobile phone. Moreover, it offers you greater control as you pre-approve where your kids can actually spend the money from a wide array of vendors which include multiplexes, bookstores, restaurants and cafes amongst others.
  • Preparing them for the life ahead: You can also choose to set a list of chores your children can participate in to unlock funds for themselves, thereby laying down early foundations for their professional lives. Moreover, they would become far more responsible with their spending, with the knowledge that they will have to earn their next allowance.
  • Offers your children autonomy: It is a well-established fact that teens dislike being treated like toddlers and on the contrary enjoy having a certain level of autonomy. Despite the fact that prepaid cards for kids offer you greater control over their spending, they also offer them the agency to pick and choose the tasks they would like to undertake to unlock money for their personal use, thereby instilling them with a sense of freedom as well as making them aware of the responsibility of their actions.
  • Protects their financial future: There have been numerous cases of young adults being allowed their own credit cards, eventually landing themselves up in huge debt by spending their credit in a frivolous fashion. Generally, credit card funds are seen as ‘free money’ by youngsters, who have little to no knowledge of the perils of a bad credit score. A bad credit score could make them ineligible for a student, house, and various other types of bank loans. Here, prepaid cards for kids act as a great alternative as sterner withdrawal limits help you in raising individuals with more conscious spending habits.
  • Less risky than cash: Apart from saving you the hassle of fishing out for change every time your kid wants a bar of chocolate or an ice-cream, a prepaid debit card also makes it a safer experience for your child when they are out and about on their own. It eliminates the chances of theft or human error; since you can always forget your cash or misplace your wallet somewhere. A secure PIN prevents anyone from misusing your child’s prepaid debit card and in case it is lost or stolen, you can always get it blocked by calling up the customer care service.

Thus, in exchange for just a few dollars every month in the form of activation and transfer fees, you can enjoy peace of mind as well as assist your children in creating a safer tomorrow for themselves.

To register with SpendSafe, click here.

7 Reasons Why Financial Literacy Is Important at an Early Age

By Educating

Parenting is a non-stop 24/7 job. As our children grow older, our job as parents changes from teaching them how to sit on a potty and clean themselves to teaching them how to handle chopsticks like a pro to making them aware of how to handle money. Financial literacy is now an essential life skill and one that needs to be taught early on. Research has shown that the quicker you teach your child how to handle money, the higher the chances of the child modeling fiscally responsible behavior in future.

Here are 7 reasons why you need to teach your child financial literacy:

1. Your child needs to understand the difference between wants and needs. This will help your child master budgeting and managing finances when they’re living independently. When children are younger, all their decisions are based on wants. I want that Happy Meal. I want that toy. But as they grow, it’s essential that the true needs such as groceries, utilities and others are given more importance than the wants of fancy sneakers and expensive jeans.

2. It would do your child good to comprehend how no matter how wealthy you are, money is finite. “Make them aware of trade-offs as soon as possible,” says Peter Nigro, who is chair of the finance department at Bryant University.

3. The problems with poor purchases. It is imperative for children to understand how making money mistakes, poor purchases or not thinking through a budget can harm them. Allow your children to make mistakes (such as spending their entire allowance in one day) and don’t rectify their mistakes for them. When they suffer a little, they will understand what being financially irresponsible can lead to.

4. Teach your children how to save. The habit of saving up for something they really want or even just saving up for a rainy day is one that should be ingrained in children from an early age. A reloadable debit card is a good way of teaching a child how to save if he or she can be trained to leave some amount on the card at the end of every week. Children who learn to save well tend to continue to save well in their adult lives.

5. Introducing children to the relationship between time and money. Oftentimes money can only grow and enhance with time if invested wisely. While children should not be encouraged to invest until they are adults, it is a good time to start talking to them about secure and risky investments. Children who have grown up discussing investments with their parents around the dinner table will be less likely to fall victim to get rich quick schemes.

6. Diversification is key. In today’s unstable global economy under Covid-19, one of the key lessons to take home is how important diversification is. Only investors who had varied and diversified investment interests did well while some of those who had put their entire holdings in one industry suffered greatly. Start talking to them about how the more diverse your holdings, the better the chances of you staying safe.

7. Money does not grow on trees. This age old adage has been repeated to every child since eternity. The best way to teach children the value of money is to make them earn an allowance by doing odd chores or a part time job. Nothing teaches the value of money as well as having to work for it.

The SpendSafe platform and reloadable debit card for kids is designed with a learning trajectory for children. We hope our experience helps your child (and maybe you!) learn valuable life lessons, just like STEM toys do.