Teenagers are brand new to credit, and parents should provide them with the financial education and tools they need to be successful. Giving them financial knowledge and responsibility is a great gift that will stay with them for a lifetime. A strong credit score will help your teen. These are some ways to help your teen get started.
Credit card authorization for minors
A credit card that allows you to add a child as an authorized customer can help you build credit before your child turns 18. Credit reporting agencies will be notified by major issuers whenever an authorized user makes payment. The child will get credit for the payments even though the account isn't theirs. This helps to build their credit history and will allow them to qualify for better cards as they grow older.
It's important that you remember that credit cards are not available to minors under 18. However, authorized users can add their child to your credit card account to allow them to access credit card benefits. Authorized users receive a card in the name of the primary cardholder.
One or two accounts to manage
It is a great way for your child to show maturity and responsibility by managing one or two accounts early in his/her life. Your child will learn valuable money skills by putting a small amount into a savings or checking account. You can also allow your child to use the debit card. This will teach him how to tell the difference between a purchase that is necessary and one that you consider a luxury.
Many banks and credit unions offer checking account options for teenagers. These accounts have lower fees than standard ones. A checking account can be opened for your teen to teach money management skills and how to reconcile accounts. You can also become a cosigner to their account, which will make monitoring the teen's spending easier.
Spending and budgeting responsibly
Teenagers can learn to budget and manage their money. You can start by using a debit card that allows you to pay with your own money. Late payments can be charged interest on credit cards. Credit cards are loans from credit card issuers. Saving money is important for long-term financial health, and budgeting can help keep spending in check.
Setting goals is a great way to help your teen think about long-term and short-term goals. They can make short-term goals such as saving for a car, while longer-term goals might include a college education or working toward a career.
Identity theft prevention
Online social networking sites are a great way to avoid identity theft. Many teens aren't shy about sharing personal information with their friends, and their status updates are publicly searchable. This allows identity thieves to quickly collect information and then use it for creating fake identities. Online updates can reveal the address and whereabouts of a teenager's home, for example.
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. Because they don't regularly review their credit reports, they are more likely to be targeted. It's easy to find teenagers' social security numbers online. Identity thieves may even be a close friend or family member.