Prepay = child's play | Incentive & Motivation

Originally pioneered in the US, prepaid cards aimed at children and young adults were designed to provide a convenient and secure way for teens to carry money, and crucially gives them some early experience of managing cards and budgets sensibly without the risk of going overdrawn.

These cards can also offer a first real opportunity for young people to proactively be responsible for their own finances, and many cards are linked to online accounts that provide associated hints, tips and educational content on managing money. This can lead to greater engagement as they feel they are learning about budgeting independently rather than being dictated to. 

While the young person feels in control, in reality, it’s the parents who really hold the purse strings. Mum and dad have peace of mind knowing that their child can move around freely without the fear of them being stranded without money, adding to their youngsters’ independence. However, for those who feel queasy at the idea of Junior being quite so self-sufficient, there are cards that offer insight into their child’s spending habits by way of full access to transaction details, sent to the parent via text or email whenever money is spent.

Joanne Donoghue, head of marketing for Asda Money, explains how parents helped drive the decision for the retailer to create its own preloaded cards for young people: “We’ve offered saving cards for years and this felt like a natural extension, especially as feedback from our ‘Asda Mum’ customers said that they would value an initiative which would help their children understand the concept of budgeting spend.”

While universally accepted cards for children are generally limited to those over 13, Asda was keen to offer a product which helped educate younger children and bridged the gap between the age at which children start to receive pocket money and when they typically open a bank account.

So the Monkey Bank card, aimed at children aged 6-12 years, was launched in 2010. Children receive a Monkey Bank card which can be topped up at the checkout and then used to save and pay for goods in-store.

All cardholders also gain access to a special online game, which while free to play, sees youngsters with higher balances given greater levels of access, encouraging them to save rather than spend. 

Donoghue continues: “In today’s market, it is particularly hard for people to save money, so anything we can do to help them achieve this always proves popular. We find parents like the simplicity of these cards and are keen to start using them when their kids come of age.”

Another growing market for preloaded cards which companies like Asda are starting to explore is student cards. These work by giving parents and students a copy of the card, allowing parents to top up the balance in store or online, and the student access to the increased spend.

These cards offer a convenient solution for parents looking to help support offspring living away from home. The young person also gains experience of budgeting for groceries and necessities without the risk of incurring debt.

Key points about preloaded cards

Advantages

Education: The cards teach children about budgeting, monitoring spend and responsible use of cards.
Security: Cards can be less appealing to thieves than cash and can be frozen, cancelled and replaced.
Ease of use: They are increasingly accepted as widely as Visa, with easy-to-use websites allowing the cardholder to manage accounts.
Parental role: Parents have full access to account activity and can easily add funds in emergencies.

Issues to be aware of
Balances: As cards have no overdraft option it is important to check the balance regularly or carry alternative means of payment in case of emergency/urgent spend.
Limits: Limiting the balance at any given time will also limit the maximum loss should the card be stolen.
Fees: Before choosing a card parents should check if any fees apply, especially when activating or topping up. Cards may attract ATM withdrawal fees, so holders should think about withdrawing cash via the bank or cashback.
Accessibility: Anyone with a fixed address can obtain a card. Because there is no overdraft option there is no need for credit histories to be checked.