4 Ways to Financially Protect Your Kids

I‘ve always been driven to protect others — whether it was helping bullied classmates in school or making sure my grandparents didn’t fall victim to fraud or financial elder abuse. Now, as a mom, that instinct has only grown stronger. Some might label it as a “mama bear” instinct or helicopter parenting, but my background in anti-money laundering and fraud detection has taught me to always be prepared and stay vigilant.

With parenting forums and headlines often buzzing about ways to keep kids safe online, it’s equally important to consider how we can also protect their financial well-being. Here are a few of the proactive measures I’m taking to protect my child:

1. Freeze their credit

In 2022, the Federal Trade Commission received over 1.1 million reports related to identity theft. And in the first half of 2023, we saw 560,000 cases reported, which set a trajectory to surpass 1 million reports. Although these numbers are high, only 17% of Americans froze or placed a fraud alert on their credit, according to a LendingTree survey.

Child identity theft is real — one I know firsthand as I wasn’t able to obtain my learner’s permit because my identity had been stolen. Failing to freeze your child’s social security number (SSN) puts them at risk of identity theft, potentially leading to fraudulent accounts opened in their name, like credit cards or bank accounts. Worse yet, this can go undetected for years.

All three credit bureaus offer a way to freeze your child’s credit. You’ll need to fill out a form and mail it to the credit bureau along with copies of documents, such as your government-issued ID, your child’s birth certificate, SSN card, and more.

2. Open a savings account

Having a savings account for your kid is important for their financial security and future. From custodial accounts to 529 plans, there are many different types of kids’ savings accounts to consider — and you don’t need to choose just one type of account.

529 plans are better if you’re looking for an account strictly used toward tuition or other education expenses. A custodial account is owned by your child but managed by you as the account’s custodian.

There are also traditional savings accounts for kids that you can either open as a custodial account or as a joint owner. While there are ones that are specifically geared toward kids, they often come with rates under 1% APY.

If you’re going the more traditional savings route, look at high-yield savings accounts that aren’t marketed toward kids. Not all standard high-yield accounts will allow you to open it as a joint or custodial account, but many do and offer rates as strong as 5% APY.

3. Teach financial literacy early

The demand for more financial literacy education is on the rise as more states have mandated personal finance in their curriculum, but it doesn’t have to end there. One of the best ways to financially protect your child for the future is to teach them about money.

And it’s all about finding those small teachable moments. The grocery store is one of the easiest ways to introduce this. While shopping, you’re often making purchasing decisions in your head.

If your child is with you, start voicing your decisions aloud. Did you choose that bag of salad because it was on sale, had a buy-one-get-on-free deal or perhaps it offered a larger quantity for the same price, making it the better option? Your kid will start picking up on that thought process, and you can later turn it over to them by asking them which one they’d choose.

Alternatively, you can ask your kid to help you shop for groceries with a set list and budget you give them before walking into the store.

4. Boost their financial confidence

Teaching your kid about money can help boost their financial education, but giving them the opportunity to apply it in real-life situations can help boost their confidence.

Depending on your child’s age, there are different ways you can do this. If they’re not yet ready to manage an actual bank account, you can start them off with a piggy bank or a virtual account that simulates a bank account.

But if they’re ready to manage an actual account, plenty of kids’ bank accounts can teach them the responsibility of using a debit card and how to manage their savings and spending money separately.

Bottom line

Protecting your child’s financial future doesn’t have to be complicated. The key is communication. Just as you’d talk to your kid about online safety, regularly talking to them about their finances and keeping their personal information safe is crucial. By starting early and keeping the dialogue open, you’re giving your children the tools they need to manage their money confidently and securely.

Alexa Serrano Cruz is a personal finance editor at Finder, specializing in consumer and business banking. She has worked with publishers and magazines in New York City and Miami. She has extensive experience editing articles, and helping readers make informed decisions on their money.

Alexa is a certified anti-money laundering specialist, and her editorial and personal financing expertise has been featured in top publications, including Nasdaq, Best Company, U.S. News & World Report, MSN, Yahoo, and ValueWalk. She has also made appearances on Winnie Sun TV, money podcasts such as LifeBlood, and broadcast news publications like Fox News and NBC News.

Alexa holds a bachelor’s degree in English from Wesleyan College and enjoys reading memoirs in her spare time.

This article originally appeared on Finder.com and was syndicated by MediaFeed.org.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.