3 Easy Ways To Help Your Teen Build Credit

0
17

One of the most valuable lessons to teach your kids is how to manage their economic livelihood. The teen years are the final milestone before one embarks on adulthood and financial independence. If you’re the parent of a teen, using this time to help your teen start building credit is crucial. If you help your teen build a credit history now, they’ll be set for landing better interest rates, loan approvals, and big savings in early adulthood. Teach your high schooler good money habits and set them up for financial success by exploring these three easy ways to help your teen build credit.

Cover the Basics

Before introducing your teen to credit, cover the fundamentals of what having a credit card means and the value of building credit for their finances. Educate your teen about the consequences of debt on their credit score and how to navigate their finances to protect their credit score.

Open a Checking Account

Open a checking account for your teen to help them understand deposits and how to track their spending. Their first checking account is also an opportunity to teach them about banking fees and penalties. When your teen shows a basic understanding of living within their means, consider opening a debit card linked to their checking account.

Sign Them Up for a Joint Secured Credit Card

Individuals under the age of 21 and without an independent source of income require a cosigner to sign up for a credit card. Allowing your teen to use a credit as an authorized user builds credit under their name while giving you access to monitor their spending.

If you’re planning to provide your teen with their own credit card but you don’t want to risk them lowering their credit score or your own, consider opening a joint secured credit card. These use the initial deposit as the credit limit and prevent your teen from overspending.

Teaching your teen about finances is necessary to setting them up for financial independence. Fortunately, banks and credit unions have systems tailored for students and young adults who are just starting out. These systems usually include low to no fees until a specific age and offer specialized access for parent cosigning. Give your teen a leg up in the realm of building credit to maximize their economic security and financial opportunities in the future.

3 Easy Ways To Help Your Teen Build Credit