What is Financial Child Abuse?
To put it simply, financial child abuse is when someone intentionally exploits a child’s finances for their own economic gain. Unlike physical abuse, financial abuse is often invisible. It can be hard for people, especially children, to even know they are being financially abused until it’s too late.
Financial abuse can have detrimental consequences on a child’s future. Abusers will use a child’s personal information to take out loans, apply for credit cards, or make big purchases they cannot pay off, causing the child to have severe debt and a damaged credit score before even entering adulthood.
This can make it quite difficult when the victim becomes an adult. Employers, landlords, and banks all look at your credit score. Even important purchases like buying a car or home require certain credit score ranges the victim cannot meet. If the abuse is not dealt with early on, this can lead the victim down a path of poverty and struggle.
There are three common forms of financial child abuse: parental financial abuse, teen financial abuse, and identity theft. We will break down these forms, discuss their warning signs, and how to help prevent or put a stop to this abuse.
- Parental Financial Abuse
Parental financial abuse can be difficult to resolve. Since parents have easy access to their child’s personal information and finances, it’s hard to detect and amend parental financial abuse. Parental financial abuse doesn’t always have malicious intent. Sometimes parents are in bad financial situations and use their kids’ names to get a loan, credit card, or make big purchases with ease. However, more often than not, these bills don’t get fully paid and end up damaging the child’s financial future.
Red Flags: For a child, it’s hard to understand what is going on. Some indicators to look out for include:
- A parent consistently takes a child’s gifted or earned money
- A parent demands all monetary gifts to the child are placed in the parent’s name
- A child has a credit report
- A child receives bank, loan, or credit information addressed to their name
- A child is punished for spending their own money
- A child has no access to their own money
Prevention: There’s not much a child can prevent when the parent is the abuser. However, there are things a child or trusted friend can do to help prevent ongoing damage. If a child or a trusted outsider suspects parental financial abuse, the first step they should take is getting a credit report. Looking at a credit report will allow you to assess the situation and act as proof for any potential legal action. The next step would be to contact the lenders to cancel the plan or come up with a payment plan. If it’s safe to do so, it could also be wise to sit down and talk with the parents. Again, some parents don’t necessarily know the negative consequences of exploiting their child’s financial health. Talking to them and putting a stop to it can help the situation.
- Teen Financial Abuse
Although many teens still rely on their parents for money, financial abuse is still quite evident in teen dating. For teens, dealing with finances and dating is a new experience. It can be hard to decipher what is normal and what is abuse.
Red Flags: Some common indicators of financial abuse in teen dating include:
- When one partner has to pay for all the dates
- When one partner has to ask for permission to use their own money
- When one partner has to give the other partner access to their money
- When one partner isn’t allowed to have a part-time job or is limited on how much they can work
Prevention: To help prevent financial abuse in teen dating, it’s important to talk with your teen about financial abuse. Knowledge is power. Knowing the signs and red flags of financial abuse can help you and your teen avoid these situations. Financial abuse is often paired up with other forms of abuse, such as emotional, verbal, physical, or sexual abuse. If you suspect your teen is experiencing financial abuse, look for signs of other forms of abuse as well. Talking with your teen about this may be hard, but it’s important to encourage your teen to leave the relationship before it gets dangerous.
- Identity Theft
There are some cases where a child could fall victim to financial abuse from a stranger. Children are 50 times more at risk of being victims of identity theft than adults. More often than not, children don’t have credit reports. This is almost like a blank slate for a thief; since they can use the clean score to get loans, jobs, and other opportunities they may have not been able to get before. Not only that, but because children don’t need to check their credit scores, thieves are less likely to get caught.
Red Flags: Many signs point to your child being a potential victim of identity theft. Some include:
- If your child has a credit report at all
- If you can not open a line of credit for your child because of a credit check
- If your child is denied their first job due to poor credit
- If your child cannot open up an account because an account already exists in their name
- If you cannot claim your child as a dependent because the child makes too much money
Prevention: Most children don’t know they’re victims of identity theft until it’s too late. Unlike teen and parental financial abuse, there are no obvious signs to detect identity theft. To help lessen the chances of child identity theft, it’s important to avoid sharing your child’s personal information and to educate your child about cyber safety. Some parents will even consider getting a credit score monitor or even go as far as freezing their child’s credit report.
Financial child abuse may not be the most visible form of abuse, but it is a serious issue that has many negative long-term effects. If you suspect a child is a victim of financial abuse, speak with them and guide them to get the help they need.