You would think American kids would be the best in the world at managing money. After all, their families on-average are among the most privileged on our planet.

Yet according to studies, too many teens leave school no wiser than a preschooler about finance. I still remember the day when my small son, angry at being denied some coveted purchase, pointed at my wallet and fumed, “You can, too, buy it. Just write one of those checks in there!”

By the time he left for college, my son had a job and a checking account, so he understood money matters a little better. We took the leap, and like his sisters before him, he opened a low-limit credit card with the promise that he would pay off balances as soon as they were due. While not without risk, this option provided convenience for our college kid,s and for us. Plus, it taught them to manage credit and establish credit records, which served them well when purchasing homes recently.

Card Issuers Target Teens
Credit card companies have always marketed heavily on college campuses. Now they are swooping down on even younger consumers. They know that the 31.3 million teens in the U.S. are working and spending their own earnings—as well as plenty of mom’s and dad’s. In 2006, teens shelled out $195 billion of their own money, compared with $94 billion in 1999, according to a Harris group survey.

So, it’s not surprising that companies are marketing co-signed credit cards to high school juniors and seniors. Mailings come to parents offering credit limits as low as $200, so these cards offer some level of protection; but they often come with stiff interest rates, and parents are legally responsible for the accounts.

Prepaid Cards—Allowances for the 21st Century?
This year’s college freshmen have what some parents consider an even better tool to help them manage their money. Companies like Allow Card of America, Inc., are unveiling prepaid credit cards created specifically for kids and teens.

Parents apply for a prepaid credit card in their child’s name, and deposit money into the account to activate it. Children can then use their card anywhere Visa or MasterCard is accepted. When the card is used to make a purchase, that amount is deducted from the card balance. When the card balance is low, parents can reload the card from their checking account or credit card.

Prepaid cards often come with extra features, such as online account controls and tools, financial lessons and interactive games designed to teach fiscal responsibility.

Parents—The Anti-debt
At the heart of good prepaid programs is parental control. From online portals, parents can monitor and load the cards 24- hours-a-day, seven-days-a-week. (Especially helpful for answering those panicked midnight calls for extra cash.) The Allow Card, in particular, offers over 35 parental controls, allowing parents to set parameters for their teens’ spending. The site even allows parents to lockout specific merchant categories, so teens can’t spend money at undesired locations.

Young people win, sponsors say, because the cards help kids get a grasp of their allowance and finances, establish a better sense of trust with their parents and learn valuable life lessons, while still giving them financial independence.

Parents win because they have a better way to give and track allowance monies. Plus, kids have a better way to pay for their needs in a way that is safer than carrying cash. Major credit cards are accepted at millions of locations, so they are a convenient way to pay for everyday items. Because of the nature of the debit system, teens can’t over-spend their account and rack up debt.

But, buyer beware. Fees can add up fast, especially if kids get in the habit of trying to spend more money than they have available. Prepaid credit cards for children do not help build a credit history because account records are not reported to the credit bureaus. And if the parents don’t teach their children the proper use of credit cards, it can lead to debt problems when they are old enough to get a real credit card.

Credit $ource Online suggests some guidelines for responsible use of credit cards:

• Be clear about what your child can and can’t use the card for.
• Teach children to use their credit card only for things they would be willing to pay for with cash.
• Track transactions and balances in the register. Don’t forget to include debit card or ATM fees.
• Collect all sales receipts to prevent a thief from using the information to make purchases.
• Go over monthly statements with your child and monitor spending habits.
• If the card is lost or stolen, contact the card issuer immediately to cancel the card.

• Sit down with children and show them what fees and interest can cost over time.

  Here are other resources:

  • Kids.gov/money
  Catalogs a host of resources on saving and spending money.

  • The Michigan Jump$tart Coalition
  Promotes financial literacy among youth, with newsletters, information, and online financial tools like car loan, compound interest and credit card payoff calculators.