Should you buy a PAYG or contract for your teen at Christmas?…..

I was posed this by an Express journalist writing a story the other day. It’s an interesting question. On the whole call and text charges on the best contract mobile packages are substantially cheaper than the best Pay-As-You-Go packages (see mobile cost cutting article), afterall do it right and you can pay virtually no monthly fee – via cashback and get lots of free calls and texts. So on a purely financial basis, there’s no doubt, go for a contract.

Yet with a teen it isn’t a purely financial basis. First of all the contract will most likely be in your name not their’s, as a credit check is needed, and if they spend more than you want, it’s you who’ll foot the bill not them. All this would suggest that a PAYG mobile is much better for controlling and limiting expenditure, as while some contract packages do allow ‘monthly limits’ many reports say they simply don’t stop calling after a point, so the bill runs on and on.

So what’s the solution, value or control? Of course it depends on the teen. I hope my big sister isn’t reading this, but when we were teenagers, she tended to be a spender and I (no surprise) was a saver. Had we both had mobiles back then, I would’ve been under budget and her substantially over (then again that’s partly because she was much more popular than me!). So in some cases going for value will work.

Yet where you’re not sure here’s my suggested solution:

1. Get a PAYG phone.
2. When picking it, do the research with your teen to find the best package for them (see mobile cost cutting article). This in itself is a great lesson in how to be a good consumer. By letting them consider ‘how many text’s and ‘how many calls’ on ‘my budget’ it’s a good way to discover that money isn’t endless and is always a matter of ‘choosing between priorities’. It’s also really helps to show that getting the latest hi-tech phone, with many gizmo’s that will remain unused, may mean you can’t afford to actually make calls and texts!
3. Next get them to use it with their money. This is a great budgeting exercise. If they spend all the cash in the first two weeks of the month, well that’s it, there’s no more. It’s a very good way to educate them into the fact finance is finite.
4. Promise them that if they budget well and sensibly, don’t overspend on the phone and manage it well, then as they’ve proved you can trust them, you’ll upgrade them to a contract phone next year, meaning both you and they get better value.

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