Teach Your Kids Money-Handling Skills with a PayPal Student Account

Teaching kids how to handle money properly can be confusing and stressful for parents. On the one hand, parents know that their children need experience with spending, saving, and banking in order to navigate the world when they are out on their own. On the other hand, parents know that it is far too easy for kids and young adults to get in over their heads financially and to rack up huge debts that are hard to get out of. The question, therefore, is how to let kids dip their toes into financial waters without the associated risk.

Enter the PayPal student account. PayPal- for those parents who haven't used it yet- is an online payment facilitator that allows subscribers to maintain a cash balance, have optional access to credit, receive payments from anyone with a credit card even if they don't have a PayPal account, and make payments with an ATM card just like they would with any other bank card.

The PayPal Student Card went live in 2009 and allows PayPal subscribers with teenagers to open and account for the teen (which is really a sub-account of the parent) and to be able to set controls and monitor the activity.

How does a PayPal Student Account work?

A PayPal Student Account can be set up by a parent for their teen. It is a separate account for many purposes but it is actually a sub-account of the parents' account. The parent can view balances and transactions in the Student Account and can initiate transfers back and forth. An ATM card is issued in the name of the student and he or she can use it to make online and in-store purchases. The student cards have a very low limit, however. They can take out $150 a day at the ATM or make $500 in purchases- much lower than a regular PayPal account.

The parent can optionally restrict the student account to disallow transfers in and out of the account other than to the parent. Without the restriction in place, the student can receive incoming payments from, for example, an online job.

PayPal Student Accounts do not have any access to credit so the teen can only spend what is in the account.

Kids must be at least 13 to get an account and PayPal asks for the child's birth date in the set up process.

What are the benefits of a PayPal Student Account?

There are many ways in which a parent can operate the student account to help their child learn about money and finance. Allowances can be easily transferred, either individually or on a recurring basis. Also, if your teen needs money in an emergency, you can immediately fund their PayPal account to help them out.

Many companies now have the option of paying employees and contractors through PayPal so your child can receive income from an after-school job or even a business venture through the account.

Transactions from any PayPal account (including Student Accounts) can be downloaded and entered into a budgeting and accounting program such as Quicken. Teaching a teen how to track and budget for expenses is an important first step in their financial independence.