How to Identify and Address Financial Child Abuse

Updated: March 25, 2024

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Financial abuse often goes unnoticed, especially among children. This form of abuse involves the improper or illegal use of a child's financial resources, significantly impacting their present and future well-being. Recognizing the signs and taking proactive steps can safeguard children's financial autonomy and ensure their financial future.

What Is Financial Child Abuse?

Financial abuse in children is the unauthorized or improper use of a child's financial resources for someone else's gain or control. This form of abuse can manifest through various actions, including the unauthorized use of a child's savings, identity theft or exploitation of their financial identity for loans or credit. Although this misuse may not always stem from malicious intent, it often adversely affects the child's credit and financial future.

While parents, guardians or close relatives are often the perpetrators, anyone with access to the child's financial information can commit this abuse. Below are several prevalent forms of child financial abuse:

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    Identity Theft

    A child's identity is stolen to open financial accounts or commit other financial fraud. Identity theft can lead to significant debt in the child's name, often left undiscovered until they're older.

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    Inheritance Theft

    When a designated inheritance for a child is unlawfully siphoned off. This is when funds that are meant to provide security are diverted for personal gain.

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    Misuse of Child Tax Credits

    A child's identity can be exploited to fraudulently claim tax credits. This misuse damages the child's financial future and can also lead to legal complications.

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    Child Activity Income Misuse

    From movie stars to young YouTube sensations, children earning income through various activities are at risk. Their income may be misused or outright stolen by those managing their finances.

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    Child Labor Exploitation

    When a child is coerced into working under unfair or harmful conditions, this could mean excessive hours, dangerous tasks or disproportionately low pay for their work.

How Financial Abuse Harms Children

Financial abuse can deeply affect children's immediate security and has lasting effects on their financial health and decision making. Such abuse can also lead to a loss of confidence and trust, which are critical for developing sound financial management skills. Below are some of the key economic impacts of financial child abuse.

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    Credit Damage

    Misusing a child's identity can severely damage their credit score, complicating future efforts to borrow or secure credit.

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    Inhibited Financial Growth

    The inability to engage in financial opportunities due to a lack of trust, funds or lines of credit can prevent victims from investing, saving or even earning income optimally.

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    Legal and Recovery Costs

    Addressing the aftermath of financial abuse often involves legal expenses and the costs associated with repairing credit and reclaiming stolen assets, which can be both financially and emotionally draining.

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    Potential for Future Financial Exploitation

    Early experiences of financial abuse may predispose victims to further exploitation in adulthood. Without intervention, victims may not learn to recognize the signs of financial manipulation, making them more susceptible to scams, fraud and exploitative relationships.

What to Do if You Suspect Financial Abuse

Although the consequences of financial abuse are severe, they are not insurmountable. Early intervention, comprehensive financial education and supportive relationships can play pivotal roles in mitigating these effects. If you suspect that a child is a victim of financial abuse, here are steps to report the abuse:

Document Suspicious Activity

Keep a detailed log of any unusual financial transactions or behaviors related to the child's assets. This documentation can be critical for any subsequent investigations.

Report to Authorities

Contact your local law enforcement or child protection services. These agencies have the resources and authority to conduct in-depth investigations into allegations of financial abuse.

Seek Legal Advice

Consult a legal professional specializing in family law or financial crimes. They can advise protecting the child's economic interests and navigating potential legal remedies.

Engage a Support Network

Share your concerns with trusted family members or professionals (such as teachers or counselors) who can offer support and may help monitor the situation.

Implement Financial Safeguards

Consider measures like a credit freeze to prevent further unauthorized access to the child's financial resources. This can help stop additional harm while the situation is being resolved.

Pursue Emotional Support

Professional counseling for the child (and possibly for yourself) can be beneficial. Addressing the emotional impact of financial abuse is crucial for healing and recovery.

Acting upon your suspicions and following these steps can significantly enhance a child's protection from potential financial abuse.

Hotlines and Support Groups

If you need to report financial abuse involving a child or are seeking support and resources, you can reach out to these hotlines:

National Domestic Violence Hotline

This hotline provides round-the-clock support and information to guardians confronting domestic abuse, including the financial abuse of children. It connects individuals with local resources to ensure immediate and effective assistance. For help, you can contact them at 1-800-799-SAFE (7233) or visit their website for more information.

Childhelp National Child Abuse Hotline

This hotline offers services from professional crisis counselors and is equipped to handle cases of abuse towards children, including financial exploitation. Counselors provide guidance, support and resources to help navigate these challenges. Call 1-800-4-A-CHILD (1-800-422-4453) or explore their website for further details to speak with a counselor.

How to Protect Your Child From Financial Abuse

Consider implementing the following strategies to safeguard children’s financial well-being. Note that these suggestions do not replace legal counsel specific to your situation. Always seek advice from legal professionals who can tailor solutions to your circumstances.

Guide in Account Handling

Add children to checking or savings accounts only when they have reached a level of maturity that allows them to understand and manage these accounts responsibly. This educates them about financial management and helps them monitor transactions more effectively.

Monitor Financial Accounts

Regular monitoring of the child's financial activities can help in the early detection of unauthorized transactions, providing an opportunity to intervene before significant harm is done.

Secure Personal Information

Diligently secure your child's social security number and other personal information. Limit sharing their personal information to prevent identity theft and financial fraud. Teach your child the significance of protecting personal and financial information to avoid identity theft and fraud.

Enhance Financial Literacy

Equip children with a strong foundation in financial literacy to prevent financial abuse. Teach them about budgeting, savings and responsible money management to empower their economic decisions and resilience against manipulative tactics.

Engage Schools and Community

Advocate for integrating financial education into school curriculums to provide children with essential knowledge on money management and identifying potential financial abuse. Support community organizations in hosting workshops and events focused on preventing child economic abuse, offering valuable resources for deterrence and recovery.

Additional Resources

Below is a list of resources that provide services ranging from counseling to legal support and for combating child financial abuse.

  • Children's Defense Fund (CDF): Advocates for children's rights to ensure a level playing field for all children. CDF focuses on policy research and public awareness campaigns to protect children from harm and ensure access to health care, education and a fair legal system.
  • Consumer Financial Protection Bureau (CFPB): Offers financial education resources to protect consumers, including minors, from financial harm. The CFPB provides tools for managing money, understanding consumer rights and reporting financial exploitation.
  • National Center for Victims of Crime: Delivers support and information for victims of all types of crimes, including financial abuse. The center offers resources for recovery and navigation of the legal system to ensure victims' rights are upheld.
  • National Child Traumatic Stress Network (NCTSN): Provides extensive resources and research on child trauma. NCTSN offers guidance for professionals and families to understand and mitigate the impact of trauma on children.
  • National Children's Advocacy Center (NCAC): Specializes in training, support and resources for addressing child abuse. NCAC promotes effective, coordinated responses to child abuse, including legal and psychological support services.
  • National Foundation for Credit Counseling (NFCC): Provides counseling and financial education services to help individuals, including families with children, manage debt and improve their economic situations. NFCC can assist in recovering from financial abuse and rebuilding financial health.

About Nathan Paulus

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Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.