How Parents Can Educate Their Kids About Financial Scams

Some of the best money lessons for kids are achieved by doing, like reaching a savings goal or sticking to a budget. However, other money lessons are best to avoid. High on that list is falling for a money scam. Financial fraud reached an all-time high this past year — in fact, more than $12 billion was lost to cybercrime in the U.S. in 2023, according to the FBI's Internet Crime Report — and even the most financially smart or tech-savvy people can become victims.

And it's not just adults being targeted: People under the age of 20 reported more than $50 million in losses. Younger people actually reported losing money to fraud more often than older people, from 44 percent of ages 20 to 29 to 25 percent for ages 70 to 79, according to the Federal Trade Commission (FTC), but they had lower amounts of losses overall.

Here's what parents can do to make sure their kids and teens know the warning signs of fraud, what they can do to keep their money and identity safe, and how to prevent these scams before they even happen.

Stay safe on social media

The top three sources of FTC fraud cases were email, phone calls and text messages, followed by websites and apps. Social media fell next in line in total reports. However, with claims totalling nearly $1.5 billion, more money was lost on social media than any other with the median individual loss coming in at $341. And for young people, social media scams are even more common.

According to a Greenlight survey, almost (72%) of parents and kids are worried about learning inaccurate personal finance information from social media – with good reason. Nearly half of the fraud for teens ages 18 and 19 originated on social media, including online shopping and investment-related scams.

Parents need to be sharing with their kids that for any social media accounts, precaution is key. The FTC recommends the following to keep your kids (and you!) safe from scammers.

Stay private

Restrict your settings and limit who can see your posts and information.

Double-check requests

If you're asked to help a friend in need or join an unfamiliar group, check with your friends first by contacting them directly in real life. If they ask you to send money with crypto, a gift card or a wire transfer, they may have been hacked.

Avoid strangers

Just like you should never agree to meet someone you've never met in person, don't send them money, either. Anyone on social media who rushes a friendship or romance could be a scammer.

Research before you buy

Before purchasing clothes, electronics or any products from a social ad or post, check the seller or company. You can search online for its name plus "scam" or "complaint" to look for prior issues. A large percentage of social media scams last year came from fake storefronts that don't deliver the goods. Items could be counterfeit, and not the real brands of clothes, shoes or fragrances you think you are paying for.

Talk about common scams to avoid

When people talk about fraud with their friends or family, they're more likely to avoid it, and it keeps scamming at the top of their mind. Here are some common scams to avoid:

Beware of imposters

Scammers pretend they are from a business you have an account with — such as your bank, an e-commerce site or a streaming service — to steal money. They may pose as a fraud department, technical support or billing department. In 2023, these types of scams stole $752 million.

Understand AI and high-tech scams

Another type of imposter scam can impersonate loved ones using technology such as voice cloning. They can create fake messages that sound authentic using video clips they find online. The FTC warns about family emergency scams, which also could pretend to be an authority figure like a lawyer or doctor.

Watch out for bogus investments

Opportunities that promise big returns in exchange for your investment may not be legitimate, like "money-flipping" or "cash-flipping" schemes on TikTok. In 2023, scammers stole $4.6 billion from victims. Many asked for money through services like Zelle or Venmo with promises of investing in the stock market or cryptocurrency. Don't send money to people you don't know.

Don't pay for "free" things

If you're asked to send money to claim a prize, lottery, sweepstakes (the 3rd most common fraud in 2023) or pay a charge for an employment opportunity — it's likely a fake.

Protect your personal identity

Explain identity theft to your kids and teens so they can keep themselves safe.

Make strong, unique passwords

Don't have passwords that are easy to guess. Two-factor authentication should be used when possible. It's also a good idea to have a family password that you can ask for in case someone is impersonating a loved one over the phone or through text.

Don't share account information

Keep your personal information safe, and don't share usernames, one-time codes or financial details.

Don't click on links in suspicious emails or texts

Be careful to avoid phishing attempts that could steal your personal or financial information, such as asking you to "update" your payment information with a card number.

Learn how to spot scammers

If you get a message that's urgent or threatening trouble, and they ask you to withdraw or send money by any method for any reason, don't do it without more investigation. If it's an email, delete it. If it's a phone call or text message, block the number. Hang up or stop texting.

Fraud prevention is key

As a parent, it's not always possible to protect your kids, teens or young adults from mistakes, but educating them on how to be smart consumers will go a long way toward keeping them safe from cyber criminals and preventing them from becoming victims of consumer fraud.

If anyone in your family gets tricked by a scammer, remember to report it. You could still prevent others from falling for the scam. Report what happened to the FTC and share your experience with the Better Business Bureau's Scam Tracker.

To help avoid the hard lesson of financial fraud or identity theft, review these tips and put them into action. Keep talking about money as your kids grow so they'll be prepared to navigate an increasingly complex world confidently on their own.

Author:

Jennifer Seitz is the Director of Education at Greenlight, the family finance company on a mission to help parents raise financially smart kids. A Certified Financial Education Instructor (CFEI) and a mom of three, Jennifer uses her expertise to teach kids and parents alike about smart money management.

She led the educational development of Level Up, a gamified financial literacy experience in the Greenlight app, and recently launched Greenlight for Classrooms, a free library of personal finance resources for K-12 teachers in all 50 states. Prior to Greenlight, Jennifer spent more than 15 years with CNN, where she held several content roles.