Raising our children means getting them ready to function as independent adults. When our children reach their teenage years, the focus of our parenting turns to allowing them to practice some of those skills. Some of the most essential skills relate to managing their finances – especially when using credit wisely. Here are some guidelines that may help you as you help them build their credit.

Begin When Your Children Are Small

Although your child won’t be able to get a credit card until they are 18, you can begin instilling the basic principles of wise financial skills when they’re children. According to CNBC, children as young as three years old begin to develop their understanding of earning and spending money. By allowing them to earn small amounts of money for household chores, they will start to absorb some of the basic concepts of making money. Once they are teens, they can apply for a teen checking account and gain practice in balancing their checkbook.

Teach Good Financial Habits and Decisions

As your children grow, they’ll see how you make financial decisions. You can emphasize how important it is to avoid bankruptcy. After all, according
to Capital One, if you declare bankruptcy, it will remain as part of your credit record for seven to 10 years.

Start With Savings and Checking Accounts

As your children grow older, it’s time to introduce them to working with a bank. You can help them to begin a savings account at a young age. If there’s something they want to buy, allow them to see how their savings account can be the key to getting that item. For a young teen, you may find a bank that has a teen checking account, so they get practice at balancing a checkbook.

Encourage Them to Apply for a Secure Credit Card

Once they reach 18 and qualify to get a credit card, please encourage them to start with a secure card, which requires them to make a deposit. They can spend up to that amount and won’t be able to spend any more until they pay back the deposit. This is the ideal way for them to learn self-discipline through their spending. After all, according to Hubspot, there are almost 2 million websites available, and many of them will be tempting for your teen.

Co-sign a Loan for a Necessary Investment

When your teenager needs to buy a car or to get a student loan, those are worthy investments. These investments are for things necessary for their future. Without a credit history, your teen will need a co-signer to borrow such a significant amount. If the loan is for school, be sure you also help them fill out a FAFSA form.

Give Them Your Best Financial Advice

During your life, you will have had financial experiences you can share. One of the most essential pieces of advice may be how to develop a budget and live on a budget. You’ll also want to advise your teen to monitor their credit standing and how to correct or contest incorrect information. You may encourage them to use the services offered by one of the credit reporting agencies, which uses timely utility payments to boost their credit ratings.

Assess Your Child’s Ability to Handle Credit

Not all teens will have the mental capacity to handle using credit. You know your child’s mental state better than anyone. Statistics show that 20% of teens will develop a mental illness during their lifetime. If your child is under the care of a psychiatrist, it may be best to move cautiously where obtaining credit for them is concerned.

As your teen begins to use credit, they will likely make mistakes. You may have to let them face the consequences of their decisions. But, if you’ve continued to coach them regarding financial choices as they grow, they’ll be adequately prepared to make wise financial decisions.