Children and credit may not sound like they go together, but they most definitely do.  A healthy financial  future is dependent in a lot of ways on credit scores.  Today’s parents are increasingly worried about their children’s credit.  What may surprise you is that you can start building your child’s credit from a young age.

Today is the day to start building credit for your child

A great way to start that credit building for your child is to call your credit card company and make them an authorized user.  When you responsibly use your card, you are building up your credit score and your child’s credit will also share in that.  It is also not necessary to give him/her a credit card.  Wait until it is evident that they are responsible enough.  As an authorized user they are already building up their credit.

If your child is a bit older, you could be a co-signer on their first credit card or you could co-sign a loan.  This will help build their credit more than being an authorized user will.  You do need to keep in mind that you are the one on the hook for paying any debt if your child can’t make the payments.

Begin Financial Education Early

The evidence is pretty clear that financially educating kids now will lead to better credit scores in the future. This means you will need to be the one to educate your children on how to responsibly manage their money.

The best time to start explaining financial basics is prior to them becoming teenagers. Starting at the preteen age is when they are likely to understand these concepts.  So make sure to have that talk prior to sending them off with a credit card.

Signs that will let you know they are ready

As parents, you know your child’s strength and weaknesses.  This will help guide you as to when is the right time to give them their own credit card.  This might be around when they start driving.  You may want them to have something on hand for emergency purposes.   For other kids, it may be more appropriate to wait until college comes around and you can co-sign a credit card for them.

If you are in the decision stages, here are some signs to look for that may tell you your child is ready for his/her own credit card:

  • Knowledge of basic money management, including knowing how a credit card works.
  • They are able to stick to a budget and spend carefully.

In conclusion, educating your kids about money and finances comes before the discussion of building credit.  Once that is achieved, then you can think about assisting them in building their credit.