It’s never too early to start planning for the future, just like it’s never too early to start teaching your kids about finances. Instilling good financial habits in kids can be critical for their management of it later on in life, and a lack of financial education can lead to, well, an experience like mine. My parents never talked money in our house, not salary, not allowance, not saving or spending or credit. When I moved out of state to go to college, I had a debit account which I used loyally for the next four years. I didn’t open up a credit card until after college, and at that point I’d already had to have my mom co-sign for 2 apartments because I had zero credit history. CNN Money featured an article yesterday where it answered the question of a concerned parent, wondering how to build her child’s credit history while she was still at home. Great question, great answer. Allow me to share Lauren Gensler’s article:
“Will making my 16-year-old daughter an authorized user on my credit card build her credit history? – V. Parikh
Yes. Using such a “credit card with training wheels,” says credit expert John Ulzheimer, is the best and most common way for a young person to build credit. The big three reporting agencies will start a file on her — either right away or when she turns 17 (policies vary).”
Click here to read the rest of Gensler’s answer, and how she suggests doing it right.
Adding your kid onto your credit card isn’t the only way to give him or her a jump start on their credit history. You could also let them open up a gas or retail store credit card (which are easier to open than regular credit cards and carry lower limits.) I think that whichever way you choose to go, the most important thing is to be open and honest with your kids about finances. Don’t be afraid to share your past mishaps and blunders. Help your kids understand the definitions of finance-related words (I didn’t know what “APR” was until after college, sadly.) Set them up for financial success!