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The knowledge of credit and how it works in depth is golden for anyone at any age. For your teenager this knowledge can be priceless and golden. The earlier you begin the credit lessons the better because a teenager is at the peak of needing to know before they out on their own.
- Enroll them in a credit class. There are complimentary ones and paid ones. These are also offered online as well as offline. Here is a really good online one – http://www.united-credit.org/CreditEducation.aspx and for offline just Google Credit Classes Locally.
- Teach them the importance paying bills and paying them on time. Also teach them the consequence of not paying on time or otherwise. Example: If I had not paid the water bill then we would have gotten further notices and the water would have been eventually turned off until I could pay however because I always pay by the due date therefore we are not in jeopardy off the water being turned off.
- Help them establish a student bank account. Most banks and credit unions will allow you to do this at age sixteen. I would personally include it as a birthday present on their sixteenth birthday because good credit is a gift. Make sure to get a checking and savings account as well as a bank card and checks with them. Why checks? Every responsible citizen should still know how to write a check in my opinion. Make sure they understand online bill pay as well as balancing their account(s).
- Add them to a credit card as an authorized user or share a prepaid credit card. This gives them a jumpstart on building credit and helps you manage them and their credit usage and decisions. Set very clear boundaries on what they can and cannot do with their joint credit with you. Give them a monthly limit even if it is small just so they experience this responsibility. Also, be sure to share they do not have to spend the credit limit monthly or ever. It is best to practice not ever reaching your credit limit.
- Strongly encourage your child(ren) to save at least 25% of all money they receive. This is so they understand and always have savings in case of an emergency or to show the bank in case they need a loan or credit limit increase some day. Yes, even say $25 of the $100 they got from Aunt Jane for their birthday.
- Introduce them to the three big credit bureaus (Equifax, Experian and TransUnion) and how each one works individually and together. Make sure they know and understand which credit bureau their credit will be pulled from based on where you live. Have them check their credit for their eighteenth birthday and establish a Credit Karma account. https://www.creditkarma.com/
- Teach them how to prevent identify theft and scams against them and their credit. This is so important because identity theft is a rapidly growing crime. Just checkout the ever growing statics here – http://www.identitytheft.info/victims.aspx. The same thing with scams. The young and innocent are prey for both of these. Teach your child(ren) how to be extremely credit smart when it comes to protecting themselves from identify theft and credit or financial scams.
Embrace the lessons and make sure you as keep tabs on their credit throughout their teenage years as well as college and really age twenty five. Help them help themselves. Happy parenting!