As adults, we know that our credit scores affect major purchases, our insurance rates and, sometimes whether or not we get our dream job. As parents, it’s our responsibility to ensure our children grow to be financially independent. Prepaid debit cards can be a great tool for teaching children how to develop and maintain intelligent spending habits.

Prepaid Debit Cards vs. ATM Debit Cards

The first inclination many parents have is to open a checking account for their child once that child begins a part-time job. A checking account, and the debit card associated with it, can cause problems for children who haven’t been taught how to manage their money. Overdraft fees and insufficient fund fees can add up quickly should your child overspend. With a prepaid debit card, there are no overdraft fees and there are never insufficient fund fees. Your child can only spend the money that is on the card. Because your child literally cannot overspend, there is no chance of these fees occurring.

Fees Associated with Prepaid Debit Cards

All prepaid debit cards are not created equal. All cards have fees associated with them but these fees can vary. Do your research before deciding on which card to purchase for your child. Common fees include initial loading fees, reloading fees and monthly or yearly access fees. There are also fees associated with ATM withdrawals.

How Much To Load

How much you load onto the card will depend on the amount of disposable income you have and the arrangement you make with your child. A great way to teach your child about saving is to require that they place at least 20% of their income into an untouchable savings account and load the rest onto their card. Offer to load $5 for every $10 or $20 your child loads onto the card for themselves.

Alternatively, if your child doesn’t have a job, consider giving them an allowance for chores completed around the house. Rather than giving them cash, load their allowance onto their prepaid debit card. Set a price for each chore completed rather than a weekly amount. For instance, $10 for cutting the grass or washing the car, $5 for cleaning the bathrooms in the house, etc.

Setting Up a Budget

Once you’ve loaded a prepaid debit card for your child, sit down with them and come up with a budget just as you would for the household. List any expenses that your child has to pay for out-of-pocket. Examples of these expenses may be car insurance, gas, entertainment or nights out with friends. Help your child decide how much of their budget will be dedicated to each of these categories and encourage them to stick to that budget. Explain to your child that once they’ve run out of money on their card, they will have to earn or deposit more rather than asking you for a handout.

Tracking Spending

Many prepaid debit cards allow you to track your child’s spending habits online. Make sure that you tell your child that you will be tracking their spending, but try not to be overly controlling. This is an opportunity for your child to learn so they’ll need a bit of freedom to make mistakes. Give your child helpful advice if you notice spending habits that could use improvement and positive reinforcement when their habits are positive. If your child needs help getting back on track or staying within their budget, open a dialogue and ask for their input.

Prepaid debit cards are a great tool for teaching your child responsible money management. By giving them supervised control of their money now, you will be helping them become financially independent adults. Not only that, but you’ll help them build a foundation for a solid credit history that will benefit them as they head out into the world on their own.

Anthony Balistreri is a financial advisor and content contributor for GetDebit.com, a site that informs you how to get a debit card for yourself, your teenager or as a gift for friends or family.