Teenagers are brand new to credit, and parents should provide them with the financial education and tools they need to be successful. It is a wonderful gift to give financial responsibility and financial education that they will carry with them for the rest of their lives. Good credit will provide financial security for your teen. Here are some tips to get your teen started.
Credit card authorization for minors
A credit card allows you to add a child to your account as an authorized user. Credit reporting agencies will be notified by major issuers whenever an authorized user makes payment. The child is entitled to credit for any payments made, even if they are not the account's owner. This helps to build their credit history and will allow them to qualify for better cards as they grow older.
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 can get a card in their name tied to the account held by the primary cardholder.
One or two accounts to manage
You can demonstrate maturity and responsibility by helping your child manage one or more accounts to help build credit. By keeping a small sum in a savings account or checking account, your child will learn how to handle money and will gain valuable experience in the future. Allowing your child to use a debit card will help him distinguish between a necessary purchase from one that is luxurious.
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 even be a cosigner on their account to make it easier to track the teen’s spending.
Budgeting and responsible spending
It's not too late for teenagers to learn how to budget and spend responsibly. Start by getting a debitcard, which allows them the freedom to spend their own money. Credit cards, on the other hand, are loans from the credit card issuers, and late payments are charged interest. A budget can help you save money for your long-term financial health.
Setting goals is a great way to help your teen think about long-term and short-term goals. Short-term goals can be saved for a car or worked towards a career.
How to avoid identity theft
Online social networking sites are a great way to avoid identity theft. Teens aren't afraid to share personal information with friends. Status updates can be found online. 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 frequently target young people who have clean credit reports. They are less likely to regularly check their credit reports, which makes them more vulnerable. It's easy to find teenagers' social security numbers online. Identity thieves may even be a close friend or family member.