March 7, 2021

“The Talk” – How To Chat With Your Kids About Credit


Grasping the concept of credit and your credit score can be difficult for teens. Amber Ortega of Thrifty Ninja shares a few concrete ways for parents to tackle these subjects. 

Your child turns 18 and all of a sudden your mailbox is filled with “pre-approved” credit cards.

It may be difficult for your son or daughter to understand it, but those credit cards can haunt them for many years to come if they don’t act responsibly.

Laying a good financial foundation is the key to establishing credit worthiness. There are several things to tell your child so they start down the right path.

Open a bank account

To first establish your credit, start by opening a bank account. This is one of the most important steps because this will allow you to track your spending and to notice patterns. If possible, when you open a checking account, also open a savings account. Place a small amount of each deposit into the savings.

Creditworthiness-billKeep a steady job history and residence record

Showing you are trustworthy and reliable is important to lenders and extremely important for your credit. In order to do this, try to keep a steady record of your job history and your residences, including while in college. (Side note for parents: your teenagers or college-age kids often jump from job to job or even move in with friends because they are in a rush to be on their own. This can potentially hurt their credit if they are not ready for the responsibilities that come with those choices.)

Put utilities in your name

Without an established credit score as you’re starting out, you can still open utilities under your name. Although they normally don’t report to the credit agencies, having a good record of payments toward utilities is an alternative form of credit that may be used to help get you approved for a loan in the future. Utilities can be more than just gas and electric – you can also use cable television, phone/internet services and more.

Use credit cards wisely

Ironically, credit cards are at once the best and the worst ways to build credit. Easy as it is to use the preapproved credit card that came in the mail, it is just as easy to think of it as “free money” and to max out the card. If and when you open a card, it is important to use it wisely. Charge small amounts each month and consistently make payments to bring the balance back to zero. If you are late on even one payment, it can negatively impact your credit for up to 10 years. If you only make the minimum payment on your card, the interest will continue to grow and your purchases can end up costing you triple or more.

Limit the number

When you open a line of credit or apply for a credit card, only choose one or two. If you open too many accounts, it will negatively affect your credit and could make debt much harder to pay back.

When it comes to building good credit and a solid financial foundation, as with many things in life, slow and steady wins the race.

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