Teenagers may be new to credit. Parents need to give them the financial education and tools that will help them succeed. A great gift for teens is to teach them financial responsibility and financial literacy. Your teen will be well taken care of if they have good credit. Here are some ideas to get your teenager started.
Adding a minor as an authorized user on credit cards
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. Credit reporting agencies will be notified by major issuers whenever an authorized user makes 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.
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 get their own card in their name, tied to the account of the primary cardholder.
Manage one or more accounts
To demonstrate maturity, and to encourage responsibility in your child's young adult years, it is a good idea to start building credit by opening one or two accounts. 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. 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 often have lower fees that standard accounts. A checking account can be opened for your teen to teach money management skills and how to reconcile 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.
Spending responsibly and budgeting
It's not too late for teenagers to learn how to budget and spend responsibly. A debit card is a way for them to start paying with their own money. Late payments can be charged interest on credit cards. Credit cards are loans from credit card issuers. 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. 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. Teens share personal information freely with their friends. They can even post status updates that are searchable 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.
Even though teenagers may not know it, identity theft can still happen to them. Thieves are often looking for young people with good credit records. They are less likely to regularly check their credit reports, which makes them more vulnerable. The social security numbers of teenagers are easily accessible online. You might even find identity thieves in your family or close friends.