Help Your Child Establish Credit History

Helping your child establish and build credit early on can help set them up for foundational financial success later in life. Talking to your child about the importance of a good credit history also instills values of ownership, accountability, and pride in their credit status as they grow older. When discussing the importance of being careful with money and establishing good credit habits, consider how a good credit history and credit score can affect better rates and a smoother process for other types of loans. Here are a few ways you can get started with establishing your child’s credit history.

Instill early education

Develop good money habits and lead by example for your children. Stress the importance of always paying your bill on time, spending below your means, and avoid opening more accounts than you can comfortably manage. By setting these foundational teachings of early education, you can teach good money habits.

Differentiate a debit card and credit card

A minor may not know the difference between a credit card and debit card, and it may not be on your radar to discuss the difference between the two. Take some time to show your child how the two cards differ from each other, as well as the effects of using either.

Incentivize saving

If your child has household chores and gets paid an allowance, incorporate this into teachable moments. Consider a weekly or monthly allowance that can represent a “paycheck” from their employer. Discuss how things that they buy during the month can be paid back to the lender or if they’ve had enough funds to cover their purchases. Setting real world examples can better prepare them for the stepping stones of adulthood finances.

Add your child as an authorized user

To begin building your child’s credit before they turn 18, consider adding them as an authorized user to one or more of your credit cards. For minors ages 13-17, it’s important to trust your child’s ability to handle a credit card responsibly and agree on spending use and limits. Additionally, you can review credit card statements so your child can understand what responsible card use entails. Discuss the details of credit use and limits, the effects of carrying a balance, paying on interest, and the consequences on your credit score for not paying the bill.

Knowing how to build and establish your child’s credit history will prove beneficial to them as functioning adult in society. Teaching your children financial lessons and habits is a great way to kickstart their financial history and ultimately lead to financial success. For more questions on opening a credit card, adding an authorized user, or accessing debit cards, visit us online!

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