As parents, we want to build up our kids so they can live their best lives. We want to guide and educate them so they can succeed. One of the areas where we can help our kids is credit.
As children enter their teen years, they start thinking seriously about the future and preparing for it — things like what college to attend, which career to choose and what goals they have for their adult lives. And one of the ways that parents can help equip their teenage children for the future is to teach them about credit.
While the Credit Card Accountability Responsibility and Disclosure (CARD) Act has limited teens’ access to credit, they can still become an authorized user on a parent’s card or start building credit using a secured card.
Here are four lessons to teach your teen right now to give him a head start on their future.
1. Credit affects almost everything.
Our teens don’t have the life experience we do, so they may not realize just how all-important credit can be. They’ll need good credit to get an apartment, lease a car, and possibly to get a job, and they’ll eventually need credit to buy a house. We’re even seeing a trend where some relationships are strengthened or ended based on credit history. Credit affects many areas of life, and focusing on healthy credit creates greater opportunity.
2. Credit scores are built on habits.
If you’re unfamiliar with how credit scores are calculated, it can seem like it’s a mysterious number created by a wizard behind a curtain. But you can teach your teens that credit scores are built on an ever-growing credit history and that the way you can positively influence your credit score is to combine good credit habits (like paying on time and using no more than 25% — 10% is even better — of your credit limit) with time. That’s the real secret to healthy credit: wise credit decisions made consistently over the years.
3. It’s easier to maintain healthy credit than to fix unhealthy credit.
Drill this into your teen’s brain and hope he remembers when faced with tough credit choices: You can hurt your credit in an instant, and it can take time to bring you back to where you started. So make sure you consistently make good credit choices and keep the future in mind when making those choices.
4. Be vigilant.
Healthy credit is built with good credit habits, but those habits don’t occur only when you have a credit card (or bill) in your hand. Good credit habits also include checking credit reports regularly for errors, dealing with outstanding debt to pay it off as quickly as possible, and protecting your information (such as your credit card number and PIN) to avoid the costs and hassles of identity theft. If you want to see where your credit currently stands, you can get your credit scores for free each month using the Credit Report Card.
As parents, we want our children to live rich, rewarding lives so we educate them on the choices they will face. An education on credit is an opportunity to positively influence many aspects of their lives.