Building Credit for Teens

Parents the Jack of all Trades

Being a parent requires us to wear many hats. Especially during the various stages of our children’s life. Think about it, as a parent we are the mom/dad, coach, referee, free Uber driver, chef, doctor, lawyer, financial advisor, guidance counselor, and the list goes on. The number of responsibilities a parent must juggle makes it nearly impossible to be a master in every arena. That’s why “it takes a village” right???

From a financial perspective, having a plan in place for your children is essential. Credit cards, loans, and other banking products will be at your kids’ fingertips the moment they turn 18. Throw in student loans if your child goes to college and now, they are fully exposed as a young adult. The mere thought of our children being swayed by predatory lending and seductive banking offers will inadvertently create instant anxiety. 

Giving your children the right financial tools will prepare them for the next stage in life. Despite popular belief, parenting doesn’t stop at 18! As parents, we will need to continue to add additional tools as they grow. 


Building a financial tool bag 💰

Saving and budgeting is the most important (and least attractive) tool in your arsenal. 

Saving

  1. Set S.M.A.R.T. saving goals (Specific, Measurable, Attainable, Relevant & Time-Bound)

  2. Save before you spend

  3. Reduce the amount of expenses you have 

  4. Make sure you’re getting the best deal

  5. Set milestones and celebrate each small win

Budgeting

  1. Make sure your savings goal is aligned with your budget

  2. Understand the difference between a need and want

  3. Utilize a budgeting app for tracking

  4. Input your income and expenses in the preferred app

  5. Determine which budgeting strategy to deploy

    1. Envelope strategy

    2. 50/30/20 strategy

    3. Zero-based strategy

    4. Pay yourself first strategy

  6. Budgeting is fluid and constantly changing so ADJUST

*The most important benefit of saving/budgeting is creating good money habits. Saving/budgeting is all about discipline and being persistent. Keep it simple and have an open mind to be flexible...change is hard but necessary!

Credit… the fun part

Don’t wait until your child is 18 to start building their credit. In fact, a lot of banks don’t have an age limit for when you can add them as authorized users.  An authorized user is an additional cardholder on someone else's credit card account. Below are a list of banks and their authorized user rules:

Banking Institution Age Requirement 

Amex 13

Barclays 13

Discover 15

US Bank 16

Bank of America No min age

Capital One No min age

Chase No min age

Citi No min age

Wells Fargo No min age

Once your child turns 18, they will be able to apply for accounts on their own. I strongly suggest starting with a secured credit card with a low limit. I also strongly suggest applying for Self, Chime, and Credit Strong credit-building accounts. 

In essence, keep it simple, fun and celebrate the small achievements.  

Disclaimer: The child’s balance should be kept under 30% to maximize the benefit and not start them off on a bad foot.