Navigating the world of finance can feel like a complex playground where the prepared thrive and the unprepared falter. Learning financial literacy — including how to build and retain good credit — is a skill and habit that's best cultivated at a young age.
Enter FreeKick, a new tool to help parents introduce their children to the concept of credit without putting their own credit at risk.
But how does it work, and is it worth signing up for? We looked into the service to help you make an informed decision.
Photo credit: LittleCityLifestylePhotography/istockphotoWhat Is FreeKick?
FreeKick is an online service launched by Austin Capital Bank based out of Austin, Texas. It's designed to help children build a healthy credit score before they reach adulthood, and operates on the fundamental principle of allowing kids to "play the game" of credit under parental guidance. In essence, it's a financial education tool that doubles as a credit-boosting platform.
In the past, the most common way for parents to help their kids establish credit was to include them as an authorized user on their credit card. However, this approach has its pitfalls. For example, if a parent fails to make a payment, it can negatively impact the child's credit score, and any purchases made by the child on the card becomes the financial responsibility of the parent.
How Does FreeKick Work?
The way FreeKick works is fairly simple. The platform lets parents cosign a credit account for their kids by having them make a one-time, FDIC-insured deposit into the account, which the child can then report to the major credit bureaus as a credit-building loan they were enrolled in once they turn 18.
FreeKick is available to parents or guardians of children or young adults aged 14 to 25 years. Once registered, users have the option to deposit one of three amounts into the account: $1,000, $1,750, or $2,500. Opting for a deposit of either $1,000 or $1,750 incurs an annual fee of $99 and $49, respectively. However, a deposit of $2,500 allows you to use the service at no cost.
After setting up an account and depositing the funds, FreeKick uses these funds to repay the loan. Once the loan is paid off through monthly payments over a 12-month period, FreeKick refunds 100% of your money back — and gives you the option of extending the account for another annual cycle. (Note that if you choose to close the account, this could affect you and your child's credit score, because the age of open accounts matters when it comes to building credit.)
Photo credit: PeopleImages/istockphotoIs FreeKick Worth Trying Out?
Generally speaking, FreeKick can serve as a valuable resource because it helps young people understand how credit works and teaches them how to go about building a strong basis for their financial future. Other reasons include:
- It's Essentially Risk-Free: FreeKick takes the mystery out of credit for young people by helping both the parent and child boost their credit without risk. It also provides a hands-on approach to understanding and building credit scores. This knowledge and experience can help kids navigate financial waters more successfully as adults.
- It Equips Young People With Tools for the Future: Having a good credit score early on opens doors for future financial milestones. Whether it's getting approved for a first credit card, renting an apartment, or securing a student loan, a good credit score can be a game-changer. According to FreeKick, having good credit can help a young person save up to $200,000 throughout their lifetime.
- It Teaches Them How to Manage Finances: FreeKick encourages regular and open conversations about money and credit between parents and their children. This interaction can foster a healthy relationship with money to better prepare young people for the financial realities and challenges of adulthood.
The Bottom Line
FreeKick works by creating an illusion of credit repayment to help your child establish good credit, all while teaching them the importance of managing their finances responsibly. Over time, this system can allow young people to build a strong credit score long before they graduate high school — giving them a financial advantage when they step into adulthood. According to FreeKick, the best gift you could give your child is that of good credit — something roughly 16% of Americans do not have.
Frequently Asked Questions
At what age can my child start using FreeKick?
FreeKick allows kids as young as 14 to start building a credit score and caps it at age 25.
How can I monitor my child's credit score growth?
Once your child becomes an adult, they will be able to access their account page in the customer portal to see how their credit score has grown over time.
Can my child's credit score affect mine?
As a cosigner, your credit score remains separate from your child's. Any action taken on the FreeKick platform will not affect your credit score.
How secure is the money I put into FreeKick?
FreeKick uses bank-level security to protect your deposits. Furthermore, the service is regulated by financial laws and the FDIC to provide an additional layer of security for your money.
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