In the last few months, our company has been getting inquiries on whether its legal to get a credit card in their child's name. We find this disturbing to know that someone
is even considering this.
The answer to the question is NO. First of all, its immoral. Why would you want to burden your child with debt? Some people say it's to help build them credit. Does a six year old need credit? Absolutely not. So we have to believe it's to help themselves for their own personal gain. Some of these people have also said that their parents did it to them. We were amazed and disappointed to see this could even occur.
In conclusion, your responsibility as a parent is to take care of your child and not for the child to have to take care of you. Don't redo the mistake of what your parents did to you. Set it straight.
If you want to help your child succeed in the future, consider setting up a 529 savings plan which is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. There are two types of 529 plans: pre-paid tuition plans and college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a pre-paid tuition plan.
Before you start saving specifically for college, you should consider your overall financial situation. Instead of saving for college, you may want to focus on other financial goals like buying a home, saving for retirement, or paying off high interest credit card bills. Remember that you may face penalties or lose benefits if you do not use the money in a 529 account for higher education expenses. If you decide that saving specifically for college is right for you, then the next step is to determine whether investing in a 529 plan is your best college saving option. Investing in a 529 plan is only one of several ways to save for college. Other tax-advantaged ways to save for college include Coverdell education savings accounts, Uniform Gifts to Minors Act (“UGMA”) accounts, Uniform Transfers to Minors Act (“UTMA”) accounts, tax-exempt municipal securities, and savings bonds. Saving for college in a taxable account is another option.
Each college saving option has advantages and disadvantages, and may have a different impact on your eligibility for financial aid, so you should evaluate each option carefully. If you need help determining which options work best for your circumstances, you should consult with your financial professional or tax advisor before you start saving.