Finances

Help Your Kids Build Their Credit Score

Three Ways to Help Your Kids Build Their Credit Score

Teaching your child as soon as they’re old enough to understand how saving, spending and the use of credit works is a tremendous benefit. Educating your children on sound money principles will help them to eventually establish a financially secure future.


Children must know the importance of credit, the responsible use and maintaining a high credit score. This is more than just dollars and cents, you’re shaping your child’s character, sense of responsibility and accountability.

The following are some tips by Cash Mart on how to educate your children to build a great credit score at a young age:

1. Teach Them the Value of Money

Some parents don’t want their young children to hold money fearing they’ll lose it or spend it on something frivolous. What parents don’t realize is their child’s initial beliefs about money will stem from how they [the parents] introduce finances to them.

Once your child starts learning to count begin teaching them how using coins and bills. Show them the monetary value of every denomination.

Help your child understand the value of money by starting with how you show importance on every hard-earned dollar. In addition to teaching your child how to count denominations, educate them on how money is earned, ways on how to save or invest money and how to spend it.

Introduce to your child the concept of saving money by setting an agreed upon goal on how much money they need to save in a given period. For reaching the goal, give them a reward in form of interest.

This way, your children will learn the value of earning money through saving it.

2. Help them Open Savings and Checking Accounts

Once the concept of interest is understood by your child, introduce them to how the banks work. Opening a savings account for your child will allow them to further understand the concepts of saving and earning interest.

Take your child to the bank and let them experience first-hand how to open a bank account to make themselves proud they did. Once they have a savings account, encourage them to deposit their earnings from their allowances, birthday or Christmas gifts.

You may even financially reward them for some house chores done. Then encourage them to save it, then deposit their “hard-earned money” in the bank. Start teaching them the concept of delayed gratification by motivating them to save money for something they want to have.

When they reach their early teens, you can introducing them to a checking account. Help them open one, and thoroughly explain the concept of owning a checking account.

Through this, you can manage a checking account teaching them about deposits, withdrawals, consequences from overdrawn or bounced checks. You can also let them experience having a debit card.

This will teach them how to spend money wisely as their spending will be limited to the balance of their checking account. Giving your child the opportunity to have their own savings and checking accounts at an early age will help them understand how to manage their own finances.

The early experienced gained will help them towards a better credit score in their adulthood.

3. Add them as Authorized Users on your Credit Card

Most credit card companies allow at least one secondary cardholder upon authorization by the primary cardholder. This means you can select a person who can also use your credit line.

You can do so when your child is a teen and mature enough to handle the responsibility. Allowing your teen to be an authorized user of your credit card will expose them early on how to establish their own credit records.

Since the secondary card will bear their name, there’s a sense of ownership and responsibility. They’ll have freedom of spending habits, while you’re teaching them to pay for their purchases by the payment due date.

To be sure, you’ll still have primary responsibility if the credit card bill is left unpaid. Fortunately, you’ll be able to monitor your child’s spending and payment habits.

By teaching them how to protect their credit record by disciplining their spending habits, you’re helping your teen to position themselves for getting cash loans with excellent terms in adulthood.

Something to Consider

When your child starts counting is the time to start laying their financial foundation, building toward positive credit behavior. By allowing your teenagers to be secondary credit card holder, you’re holding them responsible for their credit dealings.

Remember to always pay your credit card by the due date. Doing so will avoid negatively affecting your and your child’s credit history.

It’s never too early to teach kids about money. From everything from budgeting to investing this infographic gives six money concepts to teach your kids.

Copyright: kiankhoon / 123RF Stock Photo

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