Strategies to Set Up Adult Teens For Financial Success

 

When your child turns 18 and becomes an adult, that’s the perfect opportunity to spend a day or two setting him up for a bright financial future. Of course, hopefully, you’ve been teaching him financial lessons throughout his childhood. Our son will turn 18 in just a few months, and we plan to use strategies to set up adult teens for financial success.

Set Up a Budget

The first step is to teach him how to budget and then set up a budget. My son opened a checking account when he was 13, so he’s already experienced using one responsibly. However, he hasn’t had many expenses, so he hasn’t had to budget. Because we love You Need a Budget (YNAB), we’re planning to get him a subscription when he goes away to college. (College students can get one year free!)

Open a Credit Card

Opening a credit card for your teen can be a great way to help her begin to earn a credit score. You can also choose to add her to your credit card as an authorized user. Then, she inherits your credit score. However, before you choose either of these options, you need to be confident that you have a financially responsible teen.

My son can be spontaneous with money and is still developing impulse control, so I don’t feel comfortable opening a credit card for him or adding him as an authorized user. Instead, we’ll get a secured credit card for him. Then, he can have the experience of using a credit card, but there is a hard limit of how much he can charge in a month. He’ll still build credit this way, but more safely until he matures more.

Order His Credit Report

The next order of business is to order his credit report. He shouldn’t have any credit built, but we’ll order the report to verify no one has stolen his credit.

Open a Roth IRA

Opening a Roth IRA doesn’t apply to our son yet because he doesn’t have a job. However, when he does get a job, we’ll open a Roth IRA for him. The younger he is when he contributes, the more time the money has to compound and grow, setting him up for a bright future.

Freeze Credit

Finally, after we have done all of the above steps to set up our adult teen for financial success, we will freeze his credit. We will do this for two reasons.

First, freezing credit protects him from having his credit stolen. (My husband and I have had our credit frozen for 13 years now and would recommend it to anyone who wants to protect their identity and credit.)

Second, having frozen credit will prevent him from spontaneously signing up for credit cards. (You have to call to thaw your credit before you can sign up for any new credit offers.)

Final Thoughts

Older teenagers are ready to assume many of their own financial decisions. However, as their parents, you can help set up your adult teens for financial success using these strategies. In just a few months, when he turns 18, we’ll be taking these steps with our adult teen.

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