Help Kids Establish Good Credit
Even if your kids don’t understand it yet, you do: good credit is important. Without good credit, adults miss out on receiving low interest rates on financing (or, worse, they may not be eligible to receive financing at all). Bad credit also limits the ability of borrowers to access the most attractive and advantageous financial products, such as credit cards that offer member benefits and program rewards. Our “How to Help Your Kids Establish Good Credit” infographic gives guidance for having conversations about credit with your children. Heed these five simple tips and when you’re done, check out our other money & kids infographics for more.
Be on your best behavior.
Your kids are watching, and they will imitate your use of credit. By borrowing responsibly and cleaning up your own credit, you will model good behavior for your children.
Teach them the difference between what you are borrowing and what you own.
Is the car that takes them to school each day paid for? How about the house they live in? Make sure your kids can distinguish between things that you own outright and things that you are renting, leasing, or working toward owning.
Show them what really needs financing.
Just because a person has access to credit doesn’t mean there’s not a right time and a right purpose for using it. Show your kids that only a small number of major purchases (such as home and car purchases) should really need financing. Teach them about the kinds of purchases they probably should not finance or put on a credit card.
Be candid about your mistakes.
Sharing your own missteps may help your children learn from what you did wrong. Be honest with your kids about your own mistakes and their consequences.
Consider a secured card.
Aside from learning from your mistakes, let your kids learn from their own. Consider getting junior a first credit card that lets him find his legs without credit score consequences if he makes a mistake.