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  • Writer's pictureAdam Goldfarb

Building Credit For Children

Building credit is an essential aspect of financial well-being, but it's often overlooked for children. However, teaching children about credit early can give them a significant advantage in their financial future. This blog will discuss ways to help children build credit and teach them responsible financial management.


Start with the Basics

Children need to understand the fundamentals of money management before learning about credit. Begin by explaining the concept of income, expenses, savings, and budgeting. Encourage them to start saving a portion of their allowance or gift money in a savings account. This will instill the habit of saving, which is critical for building a solid financial foundation.


Add Authorized Users

Adding your child as an authorized user on your credit card account as a parent or guardian will give them access to your credit line and allow them to make purchases under your supervision. However, you must monitor their spending and ensure they understand the importance of paying off their balances on time. Adding a child as an authorized user can help them establish a credit history, which is crucial for their financial future.


Open a Joint Account

Another way to build credit for children is to open a joint bank account with them. This will allow them to make deposits and withdrawals while teaching them the importance of managing their money. Additionally, a joint account can help them build a credit history if the bank reports the account activity to the credit bureaus. Make sure to discuss the importance of maintaining a positive balance and avoiding overdraft fees.


Teach Responsible Credit Use

Teaching children about credit goes beyond adding them as authorized users or opening a joint account. It's essential to teach them about responsible credit use, such as paying bills on time, keeping credit utilization low, and avoiding high-interest debt. You can also use credit score simulators to show how their actions affect their credit score. This will help them understand the impact of their financial decisions and how they can maintain a good credit score.


Encourage Financial Responsibility

Finally, encourage your children to take financial responsibility and make smart financial decisions. This includes setting financial goals, such as saving for a big purchase or college and creating a budget to achieve those goals. You can also introduce them to financial education resources and tools, such as budgeting apps and credit score monitoring services.


Building credit for children is an essential aspect of their financial well-being. By teaching them about responsible credit use and financial management, you can help them establish a solid financial foundation and prepare them for a successful financial future.


Any opinions are those of Adam Goldfarb and not necessarily those of Raymond James.


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