Should You Add Your Child as an Authorized User?

Pros and Cons of Adding Your Child as an Authorized User

If you're thinking about putting your child on your credit card account as an authorized user, there are many potential advantages and disadvantages to consider. Here's what to keep in mind.

When Should You Add Your Child as an Authorized User?

Adding your child as an authorized user on your credit card can be a valuable tool for teaching financial responsibility and helping them build credit. However, timing and circumstances matter significantly for this decision to benefit both you and your child.

Here are some situations where it could make sense to add your child as an authorized user:

• They need regular access to funds for specific purposes, such as transportation or purchasing food between sports practices.
• You want to help them build a credit history early.
• You have good credit habits yourself.
• Your child is approaching major life milestones, such as driving or going off to college.
• You want to teach your child responsible credit card management.

That said, here are some scenarios where you may want to think twice:

• Your child is too young to understand money concepts.
• You have concerns about their spending habits.
• You need to improve your credit.
• You're not prepared to monitor the account closely.
• Your child hasn't met the minimum age requirements.

Keep in mind that just because your child meets the minimum age requirement, it doesn't mean they're ready to become an authorized user.

Also, while some card issuers may allow you to add a child, they may not report their authorized-user status to the credit bureaus until they reach the age of majority. Contact the card issuer before you go through the process to learn about its policy.

How to Teach Your Kids About Money

Adding your child as an authorized user is just one way you can teach your child how to manage money. As you consider the right approach, here are some other strategies that can help build your child's financial literacy from an early age:

• Involve your child in your budgeting process. Show them how you allocate money for different expenses, like housing, groceries and entertainment. Help them create their own simple budget using their allowance or earnings, categorizing money into spending, saving and giving.
• Demonstrate frugality in your own spending decisions. Let your children witness you comparing prices at the store, using coupons or choosing generic over name brands. Explain your thought process when making purchasing decisions, such as waiting for sales or choosing quality items that will last longer.
• Talk openly about your own money mistakes and what you learned. Share age-appropriate stories about times you overspent, didn't save enough or made poor financial decisions. This transparency helps normalize financial mistakes as learning opportunities and shows that financial growth is a lifelong process.
• Allow your kids to earn money. Whether through regular chores, entrepreneurial ventures or part-time jobs for older teens, earning money teaches the value of work and gives children hands-on experience managing their own funds. Consider tying some allowance to completed responsibilities while providing opportunities for them to earn extra through additional tasks.
• Open a savings account for them. Help them set specific savings goals, whether it's a new toy, video game or car, and show them how interest works. Check the account together regularly so they can see their balance increase and celebrate when they reach their savings milestones.

Learn more: How to Save Money for Your Child

The Bottom Line

Building strong money management skills takes time and consistent practice. By combining tools like authorized-user status with other financial literacy approaches, you can give your child multiple opportunities to learn about money in different contexts.

Remember that financial education is most effective when it's hands-on and relevant to your child's life, so adapt these strategies to match their age, interests and your family's financial situation. The goal is to help them develop confidence and competence with money that will serve them well throughout their adult lives.