Provided by Bennett C. Whitlock III, Whitlock Wealth Management
Parents want good things for their children, and a good credit record is certainly something that falls into that category. To help children achieve one, it’s important to teach them sound financial habits. Among the most fundamental lessons is valuing the money they earn and that they shouldn’t spend what they don’t have. This is the philosophy behind building a strong credit record over time that will help children take responsibility for their own financial lives.
Access to credit plays an important role in achieving financial goals and building wealth over time. A good credit score can help make it happen.
Here are three ways that you can help your teens and young adult children build a good credit record:
- Make your child an authorized user on one of your credit cards
This can be done prior to the time your child can obtain their own card, giving them the ability to use the card for their own purchases. You will still be responsible for paying off credit card bills, but your child’s credit score may benefit from being associated with your strong credit record. It can also serve as an initial test of how your child handles credit. Set expectations that they are responsible for repaying you for any charges they accumulate.
- Have them build their own credit when possible
The time will come when your children will qualify for a credit card. Again, it’s important to stress the importance of paying bills on time each month. Ideally, they will pay off the entire balance monthly to avoid high interest expenses. They also need to make timely payments on any other debt such as student loans, store credit cards, and even on expenses like utility payments. Note: debit card use does not contribute to building a credit score.
- Encourage them to exercise caution in how credit is used
Achieving a good credit score is a bit of a balancing act for younger people. They need to obtain and use credit in order to accumulate a history that will be reflected in their score. Yet they want to avoid overdoing it. Make sure your child knows not to take risks by using credit to pay large expenses that could require a long payoff period or taking on more than one or two credit cards at a time.
Managing credit is a new experience for most people just entering adulthood. By following these steps, you have an opportunity to set your children on the right track.
Bennett C. Whitlock III, CRPC®, is a Private Wealth Advisor and Managing Director with Whitlock Wealth Management, a private wealth advisory practice of Ameriprise Financial Services, Inc. He offers fee-based financial planning and asset management strategies and has been in practice for 22 years. To contact him call 703.492.7732 or visit his website at whitlockwealth.com. 12848 Harbor Dr., Suite 101 Lake Ridge, VA 22192.
Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.