Teenagers are still learning about credit. Parents should give them the tools and financial education that they need. Giving them financial knowledge and responsibility is a great gift that will stay with them for a lifetime. Good credit will provide financial security for your teen. Here are some ideas to get your teenager started.
Credit card authorization for minors
Adding a child as an authorized user on a credit card can be a great way to start building credit before they turn 18 years old. All authorized users will be notified by the major issuers when they make a payment. This means that the child receives credit for the payments, even though it is not their account. This helps build their credit and allows them to get better cards as they age.
You should remember that minors under 18 cannot open credit cards. However, if you add your child to the authorized user list, they will be eligible for credit card benefits. Authorized users are able to get their own card, which is tied to the primary cardholder's account.
One or two accounts to manage
A great way to demonstrate maturity and responsibility is to manage one or two accounts in your teenager's early years. Your child will learn valuable money skills by putting a small amount into a savings or checking account. Your child will also learn to distinguish between a necessity purchase and a luxury purchase by letting him use his debit card.
Many banks and credit institutions offer checking accounts to teenagers. These accounts often have lower fees that standard accounts. Opening a checking bank account for your teenager will teach them about money management, as well as how to reconcile their accounts. You can become a cosigner, which will make it easier and more efficient to monitor the teen’s spending habits.
Spending and budgeting responsibly
It is not too late to teach teenagers how to manage their finances and make wise spending decisions. A debit card is a way for them to start paying with their own money. On the other hand, credit cards can be used as loans by credit card companies. Late payments will incur interest. Budgeting is a great way to save money and keep your spending under control.
Setting goals can help your teenager think about long-term, as well short-term goals. Short-term goals can be saved for a car or worked towards a career.
Protect your identity from identity theft
It is important to be cautious about using online social networking sites as a way to prevent identity theft in teens. Teens share personal information freely with their friends. They can even post status updates that are searchable publicly. This makes it easy for identity thieves to gain valuable data over time and then use it to create false identities. Online updates could reveal the home address or location of a teen.
Although a teenager might not be aware of it, their information could still be used to commit identity theft. Thieves are often looking for young people with good credit records. Their credit report is less likely to be checked regularly, making them more vulnerable. Online access to teenagers' social insurance numbers is easy. It's possible for identity thieves to be close friends or family members.