Our goal is to instill healthy financial practices in our kids and help them grow up to make wise decisions about money.  One of the more important, but scariest, ways to help them is in building their credit.

Building good credit early will pay off early on helping them rent an apartment and have lower insurance payments.  It will also be crucial to one day purchasing a home and other important aspects of being an adult.

There are multiple ways for teens to build credit, including credit cards. While credit cards are sometimes vilified, they can be a healthy part of your financial life if you use them responsibly. We use credit cards, pay the balances off every month, and use the rewards points for other things. Instead of the credit card companies making money off of us, we’re making money off of them!

Here are 10 tips to help teens build credit, not just limited to having a credit card.

10 Tips to Help Teens Build Credit

Open up a checking/savings account for them

The first step is for your teen to have a place to access the money they earn or are given. It makes the most sense to open accounts where you as the parent already do your banking. This makes transfers easy when necessary and lets you easily monitor their account as they’re learning how to manage money.

Have them get a job

In order to build a credit score, you have to have some income to pay bills with. Encourage your teen to get a job so they can start saving money and learning about budgeting.

Explain how credit scores are calculated

Your teen may be working and saving money but not really care about building credit. It will help if you explain why credit scores are important, and also explain how they’re calculated. Your credit score is mostly based on:

• the number of open accounts you have
• how much of your available credit you’re using (you want to stay under 30%)
• the length of your credit history
• whether you’ve missed payments.

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