Teenagers don't know much about credit. Parents must provide financial education and tools to help them be successful. This is a great gift that will last a lifetime. Good credit will provide financial security for your teen. Here are some ideas to get your teenager started.
Credit cards allow minors to be added as authorized users
A credit card may allow you to add your child as an authorized user. This can help you start building credit even before they turn 18. 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 improves their credit score and can help them get better cards later in life.
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 are able to get their own card, which is tied to the primary cardholder's account.
Management of one or two accounts
You can demonstrate maturity and responsibility by helping your child manage one or more accounts to help build credit. Your child will be able to manage money by keeping a small amount in a checking or savings account. This will give him valuable experience for the future. 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 unions offer checking account options for teenagers. These accounts usually have lower fees than standard accounts. Opening a checking bank account for your teenager will teach them about money management, as well as how to reconcile their accounts. It is possible to become a cosigner of the account for your teen, which will make it easier for you to monitor their spending.
Budgeting and responsible spending
Teenagers don't have to be too old to learn how to budget responsibly. A debit card allows them to use their own money and can be used as a starting point. Credit cards on the other side are loans from credit card providers, with late payments being charged interest. It is crucial to save money in order to maintain a healthy financial future. Budgeting can be a good way of limiting spending.
Setting goals is a great tool to help your teen consider long-term and short term goals. Short-term goals can be saved for a car or worked towards a career.
Identity theft prevention
It is important to be cautious about using online social networking sites as a way to prevent identity theft in teens. Teens often share personal information with others, and status updates can be viewed publicly. Identity thieves can use this information to gather data and create fake identities. Online updates can reveal the address and whereabouts of a teenager's home, for example.
While a teenager doesn't realize it, his or her information is still highly susceptible to identity theft. Thieves target young people with clean credit histories. They are less likely to regularly check their credit reports, which makes them more vulnerable. Teenagers' social security numbers are available online, and they're easy to obtain. Even close friends and family members could be identity thieves.