6 great money tools for your kids

There are ways to let children and teens deal with finances -- and to monitor their spending -- while keeping them on a short leash. But be sure to read the fine print.

In these economically challenged times, more parents are looking for ways to teach their kids how to handle money.

Fortunately, there's a wealth of tools -- online and off -- to help them get the job done, regardless of the age of their offspring. From Web sites that teach kids the basics of personal finance and how to deal with debt to prepaid cards that target teens, parents have plenty of options to choose from. Many of them provide minors with real experience with handling money while still allowing parents to keep them on a fairly short leash. We take a look at several of them below.

One caveat, however: As with anything, it's important to check them out before you sign on the dotted line. A free service may be anything but, and there could be hidden fees and charges galore that could quickly eat up the deposit on a prepaid card.

Web sites

BillMyParents: This is an online service where teens can use a parent's credit card to shop at hundreds of major online retailers without ever touching it. Before the purchase is completed, an e-mail with the details is sent to a parent, who can accept or deny payment. It's best for parents who don't want to give their kids carte blanche by handing over their credit cards to them, but it doesn't give kids any experience with handling their own money.

SmartyPig: A kid can become a co-owner of a savings account -- after Mom or Dad opens the account and then invites the minor to be co-owner -- and add funds anytime at SmartyPig. Kids can also solicit friends and family members to add to the accounts. Each account is insured by the FDIC and, as of June 2009, pays an interest rate of 3%. With a number of major retailers signed on, any purchases made from the SmartyPig Web site generate discounts that users can have added back into their savings accounts, take as a price reduction on the purchase or receive as cash back via a gift card.

ChannelOne.com: An online credit card simulator is available at ChannelOne.com, an online news resource for teens. Kids can compare the pros and cons of different cards and automatically calculate the real cost of a purchase when interest charges are added in. "They can go on a virtual shopping trip and then learn how credit cards raise the real cost of items," says senior editor Karen Knapstein. For instance, a digital camera that costs $499 will actually cost $638 if you make the minimum monthly payment at an interest rate of 19.9% fixed APR after an introductory rate of 0% for six months. Knapstein adds that the simulator has proved to be quite popular.

Prepaid cards

Prepaid cards are similar to debit cards: They're accepted everywhere credit cards are taken -- assuming they're branded with a logo from Visa, MasterCard, American Express or Discover -- and purchases and ATM withdrawals are deducted from a funded account instead of drawing upon a line of credit. When the money is gone, future purchases are declined until the account is "reloaded" with funds from a bank account or credit card. Most require a parent to sign up for or approve and activate the account if a child is under 18.

UPside card: Many parents like to pay their kids an allowance with a prepaid card, and a number of companies offer prepaid cards specifically aimed at teens. The UPside Clear card is a great way to test the prepaid card waters: There's no fee to open an account; the maximum amount funded to the account is $1,000; and ATM withdrawals are not allowed. The UPside Access and UPside Edge cards charge a monthly or annual fee, but higher balances are allowed, as are ATM withdrawals.

Facecard's prepaid MasterCard: This card was inspired by social media and texting. A teen can check the balance via text message and manage the account on Facebook. Parents can also select a couple of neat built-in security features: They can prohibit the card from being used at specific kinds of businesses and can sign up to receive an e-mail or text message whenever the card is used and see where the card was used as well as how much was spent.

Payjr: Payjr offers two versions of prepaid cards: one for kids 12 and younger, the other for teens. With Payjr's Chore and Allowance System for younger kids, a parent sets up in advance a list of chores with the amount a child will earn after completing each one. The list is e-mailed to the child, and as each task is finished, the child goes online to check the task off the list. The parent receives an e-mail with the update and approves the payment, which is transferred into the child's account. Also, Payjr's Visa Buxx card for teens allows parent and child to view balances and purchases and transfer money from a bank account. Both teens and parents can receive e-mail or text messages every time the card is used for purchase details and balance notifications.

Don't forget to read the fine print

In the end, whether you're checking out an online prepaid card for your teen or your child tells you about a great new site, it pays to read the fine print.

The language can be sneaky. For example, the headlines in an ad may blare that there's no annual fee, but a deeper read of the slim disclosure sheet that arrives with a new card may reveal a whole slew of fees written in microscopic type. There, you'll discover that you'll pay a couple of bucks whenever a card is reloaded or when your kid makes an ATM withdrawal. In addition, the number of ATM transactions may be limited to a couple per month or -- guess what? -- more fees.

Fine print matters when it comes to financial statements, as well. Lori Mackey, the founder of Prosperity4Kids, a company that produces financial education books and CDs for kids, says the best tool parents can use is to be completely transparent with kids about finances. "Sit down and read the credit card statements, the terms and conditions and list of bank fees together," she says. "Kids are savvier when they know what is going on. If they know what the extra fees will be in advance and realize they're coming out of their pocket, they'll be more likely to manage their money in order to avoid them."