How To Help Your Child Build Good Credit
Written by Brooke Bernstein
It is never too early to begin learning about the value of money, the importance of saving and good habits to establish credit. While it may not seem like something our children need to worry about, it is essential for young adults to establish their credit from an early age. According to financial experts interviewed by CNBC, by getting a head start, they can access better insurance rates, enjoy a smoother experience renting an apartment and, eventually, have an easier time applying for mortgages and other types of loans. The minimum age to get a credit card is 18 but that doesn’t mean parents cannot start educating their children early!
Important credit building habits such as paying bills on time or spending below their means, can be developed during childrens elementary years. Try setting an allowance for chores to show children the process of working to earn money. Buy your child a piggy bank to teach them the concept of having savings. Need a new bedtime story? Read your children, “The Four Money Bears,” by CFP Mac Gardner. In this children’s book, Spender Bear, Saver Bear, Investor Bear, and Giver Bear work together to build a budget and teach each other how to better manage their money today and for the future.
Below are more tips to help their children build good credit early:
Teach the difference between a debit card and a credit card
Helping a 16- or 17-year-old get a used car loan can be a good way to build credit
When they turn 18, have your child open a cell phone, internet or utility account in their name and sign up to have their payments reported to the credit bureaus.
Add your child as an authorized user when they are old enough
Have them apply for a student credit card such as the Discover it® Student chrome
While teaching a child to establish good credit and money habits, ensure they understand how to balance a checkbook. Everything is computers, however; writing and understanding additional principles will give growth and a more detailed understanding of numbers.
Takeaway: START EARLY! Develop good money habits with your children from a young age. Learning these strategies now will only benefit them in the long run. Children can afford to make mistakes now so don’t wait to educate.