The short answer is: Right Now.
Worried about your kid moving away from home into their New York City apartment on their own? Speculating how you can help make it as easy as possible? Caring about your child’s health and safety is part of the job of being a parent. Credit scores affect our financial futures; therefore, it stands to reason that you can start protecting your child’s future by helping them build their credit. If you're wondering how to go about this, keep reading.
1. Authorized Usership
The easiest method to help build up your kid’s credit is to make them an authorized user on your credit card. This differs from conventional credit-building methods in that you don’t have to be 18 years old or have an income. In many authorized user situations, issues won’t set an age minimum because they’re not responsible for bill paying.
An authorized user allows the person (your child in this case) to prosper from your good credit history. While it doesn’t have the same power that traditional credit-building methods have, it’s certainly a great start. Bonus: you don’t even have to give them a credit card until you feel they are responsible enough to handle one.
Once they turn 18, there are other opportunities for you, the parent, to help them become a financial adult as well. If you’re able, you can co-sign their first credit card, car loan, or student loan. Just know that the responsibility of payment falls on your shoulders if they’re unable to do so themselves, so make sure you're comfortable with this option.
If you have experienced your own credit setbacks, there are other tools you can employ as well. Look into secured credit cards, credit-builder loans, and alternative credit cards as options.
2. Education First
It’s easy to agree with the evidence that educating kids early about money will pay off in higher credit scores later. You might want to brush up on the different aspects that can affect credit scores so you’re able to explain good credit habits easier.
It’s also helpful to explain the basics of earning, saving, and spending before your children become teenagers. They can comprehend the concept of borrowing and paying debts as preteens, so this might be a good age to start explaining the concept of credit.
3. Knowing When Your Kid Is Credit-Ready
You know your child best, so follow your instinct when it comes to helping them get a credit card, but here are some signs you can look for if you need more of a guide:
- They demonstrate an interest in building credit.
- They demonstrate an ability to budget, as well as saving and spending money wisely.
- They understand the basics of money management and can explain how a credit card works.
- They are honest about money and ask questions when they don’t understand something.
- They demonstrate maturity, such as impulse control.
Educate your children about money and decide from there which path is best when the time is right.