How A Government Identifier Became The Foundation Of Every Child's Financial Future

The Social Security Number was never meant for this.

By Diane Sacks, Founder & CEO, Parencor

Nearly a century ago, the Social Security number was created for a simple purpose: to help the government track workers and administer retirement benefits. No one imagined that one day it would become the master key to a person's financial life.

Today, that same number is used to establish credit, open financial accounts, verify employment, obtain mortgages, receive student loans, file taxes, access healthcare, and interact with countless public and private institutions.

The Social Security number evolved into the country's universal financial identifier. The way we protect it never did.

Children are now living with one of the unintended consequences. Every child receives a Social Security number shortly after birth. It is the first financial identifier they will ever own and is the credential that will follow them through virtually every major financial milestone of their lives. Long before they have a bank account, a driver's license, a job, or an investment account, that number becomes the foundation of their financial identity.

Yet from the day it is issued, it begins traveling through an expanding network of organizations. Schools collect it, healthcare providers use it, insurance companies store it, government agencies rely on it, financial institutions request it and tax returns include it. Over time, a child's Social Security number exists in far more places than most families ever realize. And every new system that stores it creates another opportunity for exposure.

Why Children Became the Target

I've spent more than 25 years in risk mitigation and identity protection. One of the biggest misconceptions I encounter is the belief that children aren't attractive targets because they don't have money. In fact, the opposite is true.

Children possess something many adults no longer have, a clean financial identity. A criminal doesn't need a child to have a credit card or a bank account. They need access to a Social Security number that has never been questioned, never been monitored, and may remain untouched for years. It’s this length of time that makes a child's identity so valuable. 

If a fraudster succeeds in using a child's Social Security number to establish fraudulent credit or create a synthetic identity, there is often an unusually long period before detection of fraud. Since children aren’t supposed to have a credit report, parents rarely think to ask whether a credit file even exists.

The very systems designed to alert adults to fraud, have nothing to monitor if a legitimate credit file has been created with a child's SSN. The result is a dangerous blind spot. For years, fraudulent activity can remain hidden. Then, one day, the child becomes an adult. Instead of celebrating life’s milestones, a young adult may discover that someone else has been using their financial identity for years and they could get denied a student loan, first apartment, or even a first job due to a bad background check. At that point, they aren't preventing fraud. They're trying to repair it.

The Problem Stayed Invisible

Over the past two decades, we've built an impressive industry around protecting adults personal information. Credit monitoring, fraud alerts, and  identity restoration. Consumers have become more aware of phishing, password security, and account monitoring than ever before. But almost none of those protections were designed for children. Parents naturally assume their child has nothing worth stealing because there are no financial accounts to protect.

Protection Has to Come First

The challenge with protecting children is fundamentally different from protecting adults. Protection has to happen before fraud occurs and that requires a shift in thinking.

For decades, financial stewardship has meant protecting investments, businesses, trusts, and real property. Those assets deserve protection. But every one of them ultimately depends on something much more basic, a trusted financial identity.

Without it, opening accounts, borrowing responsibly, verifying identity, and participating fully in the financial system become significantly more difficult.

Perhaps it's time we stopped thinking of a child's Social Security number as merely a government identifier, and begin thinking of it as the foundation of every child's financial future. The Social Security number was never designed to carry that responsibility. But today, it does. And I believe protecting that foundation will become one of the next great evolutions in financial stewardship.