Give them a budget
Good credit habits start with good money management habits. Set a budget for them—whether it’s hypothetical to learn about household expenses or use real money for some of their basic spending, like clothes and entertainment. Help them learn in a low-risk way that their spending can have consequences, both good (like saving enough money to buy a new video game) and negative (like spending too much on candy and not having enough money to go to the movies with their friends).
Have a conversation about personal finance
Having an open conversation with your kids about credit and money management is an important way to help them learn. Give them the tidbits you wish you’d had when you were younger. Teach them to pay off balances in full and talk about only spending money they have.
Beyond your conversations, be careful of what you model for your kids. Do you find yourself saying things like, “It’s okay, just put it on the credit card,” or, “We’ll pay it off next month,” in front of them? Be aware of what your children are learning from you that you might not be intending to teach them.
Add them as an authorized user on your card
Being an authorized user on a trusted adult’s credit card will help them build their credit. That means they have spending power with your account, and your on-time payments will help build their credit score. If you do decide to add them to the account as an authorized user, be sure to lay some ground rules first and have them pay their balance to you each month.
Let them open a secured credit card
A secured credit card is another good option to let older children build credit and gain experience managing their spending. With a secured card, they pay a set amount upfront to establish their credit maximum (say $500). Then they can spend up to that limit and pay it off, establishing a strong payment history that helps build their score.
Show them how to check their credit score
Individuals can access a free credit report every year from each of the major credit reporting bureaus. As they get closer to 18, show your kids how to check their scores, and go ahead and check yours at the same time to show them the differences. Plus, checking in on their credit score can be a good way to make sure they haven’t been the victim of identity theft.
Help them start saving now
Even if your kids are a few years off from becoming authorized users of your account or getting a secured card of their own, you can help them learn to save with a Rocky Super Saver account. With a $20 membership deposit, they can start banking and growing their financial knowledge with your help. And you can open a checking account for them at the same time.
Even though using a debit card doesn’t help build credit, it’s still good practice for them to check their bank balance and understand that spending with plastic translates into spending real money. They can open their first checking account with your help and deposit that birthday money and their lemonade stand earnings to start spending responsibly with their own debit card.
Apply to open your kiddo’s first account with RMCU and start them on the road to a bright financial future.
