Wednesday, 23 January 2019

As kids get into middle and high school, field trips turn into overnight, out-of-town excursions. They graduate from church retreats to week-long mission trips, and baseball games become three-day tournaments in neighboring states.

Summer camps evolve into week-long out-of-state programs.

When kids head out of town for a few days, chances are they will need money. So what's the smartest, safest way to send money with kids when they travel?

Here's an overview of some of the most popular options. Your decision will ultimately depend on your personal financial situation, the extent of the travel, and the maturity level of your child.

Cash

They will need some cash for small purchases. For example, a group of kids may want to split a pizza for lunch. But excited teens on overnight trips aren't known for being overly careful with their bags and wallets, and cash can easily get lost or stolen. So while they need to have some cash, a little cash plus some form of plastic is probably best.

Gift cards

You can purchase the most basic prepaid Visa or American Express gift cards at the drug or grocery store. They range in value from $25 to several hundred dollars. You use them just like a credit card until the value is depleted. You may pay a small fee when you purchase the card, but there are typically no transaction or other fees.

However, they typically have a fixed amount. So if your child is in Chicago on a four-day school trip and they've spent their cash and prepaid Visa card by day two, you can't reload the card.

Prepaid cards

There are more feature-rich prepaid cards available. Unlike debit cards, these prepaid cards cannot be overdrawn, thus eliminating the danger of overdraft fees. These types of cards can also be reloaded in a branch or in-network ATM.

In addition, if these types of cards are lost or stolen, they can simply be deactivated. They are not connected to a checking or credit card account, so loss or theft poses no threat to other accounts.

Prepaid cards can offer flexibility and functionality for both parents and kids. However, make sure to check the fee schedule. You may have to pay an activation fee, and some cards may charge fees for making deposits and using out-of-network ATMs. Many cards also have a monthly fee. Just make sure you understand how much it costs to use the card because those fees could add up quickly.

Checking account with a debit card

At some point, it makes sense for a young person to learn to manage a checking account and debit card. However, it's important the child understands how checking accounts work before they are allowed to use a debit card. Unless you're prepared to regularly monitor the account and transfer funds when the account balance gets low, a checking account or debit card might not be the best option for a teenager.

In addition, because a debit card connected to a checking account, a lost or stolen card can result in possible loss and huge headaches.

Credit cards

There are several important factors you need to consider before making your teen an authorized user on your credit card account.

  1. Your credit card issuer may have a minimum age requirement for authorized users. Some issuers prohibit adding minors to card accounts altogether, so be sure to check with your bank or issuer.
  2. Can they make smart purchasing decisions, or will they consider a credit card a blank check? It's important for your child to have an understanding of how credit accounts work — including the concept of interest — before they can reasonably handle a card themselves.
  3. You credit card management — how it is used and paid — has a lasting impact on your credit score. If you trust your child to make a payment on the card and they do not, your credit will be negatively affected. If your child unknowingly goes over the credit limit, you can incur fees.
  4. If you or your child loses the credit card or it is stolen, the entire account is compromised, again resulting in headaches and possible loss.

Once you settle on how you will ensure your child has money for fun and for emergencies, it's important to be clear on spending limits and safe money practices when traveling.

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