Why It Might Be A Good Idea to Give Teens Credit Cards
If you've been following the financial news lately, you've probably heard that pandemic-era consumer protections are coming to an end, although part of the social safety net the government built to weather the economic crisis remains. The federal ban on evictions expired on July 31 after a last-ditch effort by Democratic politicians failed to extend it. Stressed tenants can still claim emergency rental assistance from a large federal program, but assistance has been slow to reach those in need.
However, it is not just tenants who face the end of protections, as homeowners in arrears face the end of a foreclosure moratorium. Some other protections remain in effect.
You've probably also heard how the economy is heating up as it recovers from the pandemic economic slowdown: Gross domestic product grew faster than pre-pandemic rates in the second quarter, according to a new report. Consumers made more money from their paychecks in June, which helped drive an increase in spending. However, these expenses are accompanied by a rise in prices, since June inflation, compared to the previous year, had its largest increase in three decades.
But have you heard that giving teens access to credit can actually benefit them in the long run, according to a review? Or that a growing percentage of Americans now live in families that receive monthly government payments? Or that mothers take a huge financial hit in retirement compared to women who never had children?
To get beyond the top headlines, we review the latest surveys, polls, studies, and commentary to bring you the most interesting and relevant personal finance news you've ever missed.
What we found
Maybe 18-year-olds deserve a little credit
What is the best age to start getting credit and building your credit history? This is an issue that college-age individuals and their families often struggle with, wondering if it is better to start building credit early or wait until the person is mature enough to handle credit card responsibilities.
An analysis by a Federal Reserve researcher based on data from the Federal Reserve Bank of New York's Consumer Credit Panel suggests that when it comes to building credit, the sooner the better, depending on the type of credit. Among people who received credit for the first time between the ages of 18 and 30, those aged 18 had higher average scores (as measured by Equifax) in their 30s than did people who waited longer before obtaining credit for the first time. , according to the analysis, published in July.
Specifically, the average credit scores of 30-year-olds who first received credit at 18 were 18 points higher than those who first received credit at 20.
Measurement of the 'maternity penalty'
When women leave the workforce to care for their children, they hurt not only their current income but also their future retirement income, according to a new study showing how the social security system works to reduce the decline. - called the maternity penalty - but it does not completely eliminate it.
Women without children receive $ 1,301 in average monthly Social Security payments, on average, but mothers only receive about 60% of that: $ 785 a month, according to a recent analysis by researchers at the Center for Research on Retirement in the United States. Boston College.
This is because Social Security payments are based on lifetime earnings, which are much lower, on average, for mothers than for childless women.2
The maternity penalty in Social Security is lowered somewhat because the program's benefit structure replaces a larger portion of income for those who earn less, and also because of a provision, which is used less frequently these days, that allows that women receive their own worker benefit, or 50% of their spouse's benefit if they have been married for 10 years or more, the analysis shows.
(Partly due to lower marriage rates and higher divorce rates, only 18% of women receiving Social Security claimed a spousal benefit in 2019, compared to 35% in 1960.)
Lawmakers have recently shown a greater willingness to deal with the maternity penalty. Temporary expansion of the child tax credit should help.
Government checks have become extremely common for families
The temporary expansion of the child tax credit, which authorized monthly payments of up to $ 300 per child to families through December, may be controversial, but it is also having a major impact as one of several pandemic-era government programs designed to significantly reduce poverty and reach a wide swath of the population.
When the first credit payments were made on July 15, the percentage of people living in families receiving regular government checks actually increased from 28% to 65%, according to a recent analysis by the People's Policy Project, a progressive study of a group of experts.
Before the expansion of the child tax credit, the majority of regular government check recipients were seniors and people with disabilities receiving Disability Income payments from Social Security and Social Security, wrote Matt Bruenig, chairman of the group of experts.
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