When Prepaid Cards Make Sense

My son is 13, and we recently got more structured with his allowance and savings. We increased his weekly allowance to $13. He puts 20% in a long-term savings account (for college, car, etc.) and has about $40 a month left over. He feels pressure to spend but doesn't have any spending goals. Rather than keeping the cash on hand, he would like something like a checking account with a debit card to hold his short-term savings and keep it accessible. He doesn't want to wait for us to take him to the bank every time he needs $10.

We have looked at the Visa Buxx card as a possible solution. He could put his own money on the card and manage it himself; he recently started using Quicken for his savings account. What do you think of this idea?

As a rule, I have reservations about prepaid cards such as Visa Buxx, which let parents load money onto the card for a child's use. Although the card is marketed as a money-management tool, kids are more likely to see it as "that card my parents can fill up when the money runs out," as a teenager described it to me.

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However, there are situations in which a prepaid card might make sense. One of them is the case of a teenager who has already proven that he can manage cash but is too young for a checking account. It sounds like your son may be such a teenager, especially because you have already set up an allowance system together.

If you decide to go with a prepaid card, note that Visa Buxx is issued by banks, each of which has a lengthy schedule of fees. Read the fine print carefully.

Make sure that the money going into the account is your son's, not yours, and don't give him an advance if it runs out early.

In our household, we solved the allowance problem with a checkbook system. The kids had their own checkbooks, drawn on the bank of Mom, in which I recorded their allowance payments. When they needed money, they'd write me a check for, say, $20, subtract the amount from their balance, and I'd cash the check.

That way they didn't keep wads of cash around the house, and I didn't have to take them to the bank whenever they needed money. I had to keep small bills on hand, but that wasn't difficult.