“The goal is to build generational wealth,” reads a caption emblazoned across one of the countless TikTok videos dishing out advice on how parents can boost their children’s financial prospects.
“If you have a kid and a credit card do this: add your kid as an authorized user [and] pay the bill on time,” the TikToker who shared that clip urges his 84,000 followers. “By the time they turn 18—boom: 800 credit score for them to succeed.”
To date, the clip has been viewed almost 43,000 times.
@spoken_io Boost your kid’s credit score! #greenscreen #tipsandtricks ♬ original sound - Never Overpay Online
In the U.S., some credit card issuers permit parents to add their children as authorized users on their accounts. This addition, or when the child turns 18 (depending on the issuer), includes the entire account history on their credit report. If high balances and missed payments are avoided, this can assist minors in building a strong credit history.
Some card issuers, like Discover and American Express, have minimum age limits in place for authorized credit card users. Others, including Capital One and Citi, allow children of any age to become authorized credit card users.
The TikToker touting “generational wealth” isn’t alone in promoting the benefits of slapping a child’s name onto credit card debts. TikTok is flooded with influencers who insist that authorizing minors to use their parents or older relatives’ credit cards will set them up for a bright future.
Many of the videos uploaded to the platform are captioned with the hashtag #generationalwealth and suggest that the authorized credit card user trick is a secret hack used by the wealthy.
@mastermoneyco Help your kids get perfect credit scores like the rich. #creditscore #money #rich #moneytok #credit #wealthy #generationalwealth #personalfinance ♬ A Day in My Life - Soft boy
In a clip captioned “How to make your kids rich,” one woman says she got a head start thanks to her parents adding her name to their credit card debt.
“My parents did this for me and I actually have a credit history that’s older than I am because one of their cards was opened years before I was born,” she says. “[It] gives me a much higher credit score.”
@yourfinancialstrategist Set up your kids for success! Every parents desire is have there kids live a better life then we did. Why not start with there credit… : : : #kidsfuture #creditcardbenefits #fyp #creditcard #foryoupage #perfectcreditscore #success #crediteducation #financialfreedom #trendz #wealth #generationalwealth #letstalkfinance #kidsareourfuture ♬ original sound - J🅱️ Money Strategist
Lawrence D. Sprung, founder and lead wealth advisor at Mitlin Financial, is one of the countless American parents who have opted to add their kids as authorized users on their credit cards. He argues it’s a great way to build credit for children and to teach them how credit works.
“Our boys have been authorized users from the time the credit card company would allow it,” he tells Fortune. “My oldest was able to get a credit card in his name only once he entered college because he was an authorized user for several years prior and had a great credit rating.”
Sprung says the experience taught his son how credit cards work—and the importance of paying the bill in full and only using it for things he knows he can pay off at the end of the month.
Ganesh Pandit, an accounting professor at Adelphi University, has also authorized his children as additional users of his credit card—but he notes that parents need to carefully consider their own individual situation, as “not all 15- or 18-year-olds are made alike.”
“Adding kids as authorized users on the parent's credit card can be a win-win situation for both as long as both parties understand how each party's good and bad credit behavior can affect the other party's credit score,” he says.
“If there are multiple kids added as authorized users, every authorized user must understand their joint responsibility to the primary cardholder with respect to how much is charged on the card, and the parent must understand how to set a good example of responsible credit card use in front of their kids.”
The risks of adding children to adult credit cards
However, according to some experts, while taking advice on this from TikTok could indeed benefit your children in the long run, much of the social media guidance fails to issue sufficient warnings to parents about the downside risk involved.
Representatives for TikTok did not respond to Fortune’s request for comment.
Derek Miser, chief managing member at Knoxville, Tennessee-based Miser Wealth Partners, tells Fortune that parents ought to “seriously consider” the pros and cons before they make any decisions about giving their kids access to credit.
For children, Miser says, the benefits include establishing a credit history so that when they turn 18, they’ve already built a foundation that could enable them to apply for loans, mortgages, or their own credit cards. Meanwhile, parents can benefit from the peace of mind they get knowing their children have access to emergency funds.
But he cautions that there are also plenty of risks.
Some card issuers send children their very own credit card with their name on it once they become an approved authorized user of a credit account. According to Experian, if a child decides to go on a spending spree, the parent will be held liable for paying off the charges.
“A child could misuse the credit card and rack up excessive debt,” Miser says. “If this were to happen, it could negatively impact both the child’s and parent's credit scores. On the flip side, if the parents were to get into debt trouble, then the child could be liable for outstanding balances.”
Miser also notes that sharing a credit card with your kids could lead to privacy issues in terms of both parties being able to see how the card is being used, or conflict within the family unit.
“Taking financial advice from social media platforms could be a double-edged sword,” he advises. “While social media provides easy access to a wide range of financial advice, the advice could be coming from those who don’t have the necessary qualifications or expertise.”
@brandan.burke If you have good credit, put your loved ones on by making them an authorized user on your credit cards 💳 #credit #finance #family #generations #generationalwealth #fyp #fypシ ♬ original sound - Brandan Burke
Liam Hunt, a financial writer for Gold IRA Guide, adds that although the authorized user approach is becoming a “popular idea” among parents, it isn’t always a good idea.
“It exposes children to significant financial risk without teaching them the responsible habits they will need to manage that much risk,” he argues. “If there is any chance that your financial situation deteriorates and you can no longer service your debts, your children will then bear the consequences.”
Instead, Hunt recommends opening savings accounts in your children’s name, and teaching them how to use ATM cards to make deposits and withdrawals, read their bank statements, and budget for big-ticket items.
Kelly Palmer, founder and chief wealth officer at The Wealthy Parent, notes that “most influencers are recommending this credit card ‘hack’ because they have affiliate deals where they will earn money when you sign up for a card.”
She also tells Fortune that some parents may not be thinking long-term enough when assessing the risk.
It might seem like a harmless move when the child is young but you haven’t met your teenage child yet and don’t know what they might be capable of from a credit usage perspective,” she says. “I encourage parents to think carefully about a framework for financial literacy and a credit card certainly does not need to be a part of the plan early on.”
