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. A good credit will take care of your teen. Here are some tips to get your teen started.
Credit cards allow minors to be added as authorized users
It can be a great way for children to get credit started before they reach 18 years of age. All authorized users will be notified by the major issuers when they make a payment. The credit is given to the child for the payments, even if it's not their account. This helps to build their credit history and will allow them to qualify for better cards as they grow older.
It's important for minors to know that they cannot open a card. However, you can add your child as an authorized use to enable them to receive credit card benefits. Authorized users receive a card in the name of the primary cardholder.
Management of one or two 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. Your child will learn valuable money skills by putting a small amount into a savings or checking account. Similarly, allowing your child to use your debit card will teach him to recognize the difference between a necessary purchase and one that is a luxury.
Many credit unions and banks offer checking accounts for teenagers. These accounts have lower fees than standard ones. By opening a checking account for your teen, you can teach your child about money management and how to reconcile accounts. You can also become a cosigner to their account, which will make monitoring the teen's spending easier.
Spending responsibly and budgeting
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. Credit cards on the other side are loans from credit card providers, with late payments being charged interest. Budgeting is a great way to save money and keep your spending under control.
Setting goals is an excellent way to encourage your teen to think about both long-term and shorter-term goals. Short-term goals can be saved for a car or worked towards a career.
Protect your identity from identity theft
Avoiding identity theft is a key tip for teens. Be cautious of using social media sites. Many teens aren't shy about sharing personal information with their friends, and their status updates are publicly searchable. This is a great way for identity thieves to collect data over time and use it to create fake identities. Online updates might reveal the location and home address of teens.
Even though teens may not be aware, identity theft is possible. Thieves frequently target young people who have clean credit reports. Their credit report is less likely to be checked regularly, making them more vulnerable. Teenagers' social security numbers are available online, and they're easy to obtain. Identity thieves may even be a close friend or family member.