Syga Thomas
PODCAST MONEY
PODCAST MONEY
Teaching your kids about finances is one thing, but have you thought about helping them enter adulthood with optimal credit? It’s essential to think about how we set our kids up for their life. The childhood they experience and the lessons they learn from us ultimately create the foundation by which they start their careers.
This article will examine why it’s essential to help kids grow their credit and how we as adults can build credit for them before they become adults.
There are many reasons why it’s important to build credit, even for young kids. You might not think of it, but building their credit is important because it can help them in several ways. Here are some of the most common ways that helping with their credit can impact them when they reach adulthood.
As mentioned, having good credit is a foundation for individuals to make even better financial decisions. When you were younger, you might have been given the same opportunity, but even if you haven’t, imagine what you are doing.
Think about what kind of habits you are creating that your kids can emulate even with your future grandchildren.
Many kids start with a blank slate for credit but giving them an optimal credit situation can give them more opportunities and choices. Ultimately, it’s about giving your kids the choices they need to make good life decisions.
For example, giving them good credit gives them earlier options to buy homes, build a business, or even continue their higher education and get credit cards at an earlier age.
Another fundamental reason why building credit for kids is essential is that it helps to teach good money habits. So many kids often miss learning about good finance and money skills because schools fail to teach them.
By showing them the example of building good credit and emulating the behavior yourself, you’re teaching them so much that they will benefit from in all areas of their life.
Now that we have discussed why building credit for kids is important, getting them started on the right track is essential. There are a few tips that even the most practiced finance professionals and investors have been able to share.
These tips have helped their kids become more financially prepared for their future. So, without further ado, here are ways to help your kids build credit before they reach the age of 18.
The first rule of thumb is to start early. It doesn’t matter when you start with your kids’ credit, but the earlier you do, the better! Some children under the age of five have their own authorized accounts on credit cards.
On the other hand, some kids wait until they’re 16 to build their credit. No matter what, start as early as you can to help them on the right path.
Another essential tip to help them build credit before age 18 is to teach them good money skills. Getting a credit card or a loan before age 18 doesn’t mean they can’t practice good money skills.
Help them set up a savings account, teach them the value of investments, and even help them start a business. With you as a cosigner or helping them along the way, you can help them practice good money skills and even bond with your child.
Another essential tip that people often find to be important for building credit is to incentivize savings. Many kids like to earn and spend money, but if you find a way to incentivize their savings, they will be able to save even more and prepare themselves for their future.
Sometimes, you can create a savings account and offer to match what they put into it. For example, if your child puts in $10 a month, put $10 in there for them. It motivates them to save money, and they will see the importance of it over time.
One of the best things you can do for your student or young teen is to help them get a secured credit card. This is about saving money and showing that they are financially responsible for the challenge.
Sometimes, a secured credit card only takes a savings of a couple hundred dollars. So have your kid work a bit, save up some money, and then help them open their secure credit card to build their credit before they’re 18.
Another important tip that helps to build credit is to allow your son or daughter to co-sign with you. It helps you to create more visibility for them to credit bureaus, but it also keeps them active with their finances, even at a young age.
No matter what you’re co-signing on, whether a small loan or a credit card, this will help them build credit and lean on yours for support as they build their financial foundation.
Sometimes, you can get lucky enough that your credit card will allow you to add your son or daughter to your credit card as an authorized user. This means they can use the credit card designated for them, but they are not financially responsible for the charges on the card.
This helps them to piggyback on your credit, be able to use a credit card with your permission, and then you can teach them the value of money management while building their credit.
The earlier your kid starts to work, the better the chance they have to build credit early. Credit bureaus enjoy seeing consistent employment and a means of making money. This is part of the reason that many people enjoy seeing their kids go to work.
Not only is it a little bit less that they have to put into their allowance, but it also helps them to build their credit and to get them to understand the value of work and a paycheck.
Many people enjoy helping their kids build good credit before they enter adulthood. Hopefully, these tips helped you to get some ideas of how to help your child when they begin to think about money and investments in the future.
If any of these options are not attractive to you in your situation, consider opening a savings account for your child or with your child before their 18th birthday. For more tips on all things financial wellness, check back in the blog for more information to help you on your financial journey!
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