As you likely realize, fraudsters and scammers LOVE to steal identities. If you’re like me, you know more than one person whose identity, Social Security number, or personal information has been stolen and used illegally. Wise adults take precautions. We protect our credit card numbers, freeze our credit bureau accounts, never follow an email link without verifying it independently first, never give out our Social Security number unless we know for certain that it’s legitimate to do so, etc.
But what about your kids? A 2021 study found that 1 in 50 children in the United States (1.25 million) were victims of identity fraud in the prior 12 months. And that’s only the cases that were discovered and reported! The average U.S. family loses more than $1,000 when a child’s identity is stolen.
How does this happen? First of all, Social Security numbers are readily sold on the dark web, including those of children. Scammers can then create an identity and, for instance, take out loans under the child’s number that they never pay back. Although lenders are not supposed to give credit to anyone under the age of 18, many don’t verify a claimant’s age or are easily deceived by experienced scammers. Even worse, the child and the family often have no clue they’ve been taken advantage of until years later, when the now-adult child tries unsuccessfully to access credit, gets served with collection notices on unpaid loans, or is charged a higher insurance premium based on a poor credit score.
Another way scammers take advantage of minors is by registering an online account with the Social Security Administration in the child’s name. An account can only be opened when a person reaches 18 years of age, but if a scammer has your child’s SSN and birth date, be assured they will act quickly. If a scammer gets there first, it’s a long, arduous process to try to regain control of the account.
What do you do about this growing problem? Follow these “best practices” for your own minor children, and educate your clients to do so for theirs:
- Freeze the credit bureau records for all minor children in the household. Here are pages from the three credit bureaus specifically about freezing the report for a minor:
- As soon as children turn 18, guide them to open their SSA account. While you’re focused on this topic, educate them about Social Security. Many don’t realize what FICA withholdings are, how the eventual payment amounts are calculated or the value of these benefits in cases of disability, widowhood or retirement.
- Teach children about proper cybersecurity tactics, especially those involving social media and online exposure. Many people are concerned about seniors being victimized because they don’t understand the internet. Yet, young people also easily become victims because they trust the internet too much and regularly click on links without questioning whether it’s a good idea. You can utilize this great series of educational videos published by Common Sense Education. Each video covers a different cybersecurity topic based on the child’s age, and they are free to access. As they enter their teen years, provide the same education about scams, phishing and fraud that you provide to your adult clients.
- Finally, help children make wise financial choices. Instruct clients to consider adding their teenager as an authorized user on one of the parental credit cards, or preferably open a card in the parent’s name specifically for the child’s use as an authorized user. (The latter strategy makes it easier to determine which charges belong to the child each month.) Doing this starts building their credit history and is a helpful way to introduce them to credit.
Parents can, for instance, set a limit for how much the child is allowed to charge each month. When the monthly statement comes, require the child to pay back to the parent whatever they charged and to make that payment by the same date required by the credit card company. If they pay late, charge them interest, just like a real card. If they abuse the privilege despite honest discussions and appropriate warnings, take away the card or take their name off.
Overall, do whatever you can to educate your children and your clients’ children about finances and help protect them from identity theft. You will never regret taking those steps, and you may well regret it if you don’t.
Amy Florian is the CEO of Corgenius, combining neuroscience and psychology to train financial professions in how to build strong relationships with clients through all the losses and transitions of life.