Helping Your Child Establish Credit

When I graduated from high school, my parents gave me a sewing machine as my graduation gift.   The gift extended beyond the device, and my mother used this opportunity to help me establish credit and a good credit report. Sewing was a skill my mother taught me, and she knew that I enjoyed it. A few days after graduation, Mom and I went to the store and picked out a cabinet for the machine, which I would pay for myself. I completed a credit card application and put 20% down toward the cabinet purchase. A few days later, I received a Singer credit card in the mail. When the bill arrived, Mom had me write a check to pay the balance in full. So, at 18, I had a credit card with a record of promptly paying the debt in full.

My parents set a good example to use credit sparingly and to maintain an excellent credit record. In those days, gasoline companies and department stores issued most credit cards. They were used only in the store that issued the card. General-purpose credit cards, such as Visa and Discover, were rare in those days. I do not recall ever using the Singer credit card, but having it allowed me to apply for and receive a Sears credit card while in college. I used that card sparingly and promptly paid the balance in full upon receiving each bill. My mom invested in a gift that she knew would benefit my future.

When my sons began driving, I co-signed for a credit card for each of them. I wanted to ensure that they never got into a situation such as needing gas and not having any money. They had limits on how they could use the card. I could check the card online at any time, and my husband and I  expected them to pay their balances in full each month. If the bill was due and had not been paid, I transferred money from their savings account to pay the bill. We discussed their spending habits regularly. With a bit of guidance, they maintained excellent credit during college. When our first son to marry wanted to purchase a house, the mortgage lender was impressed that a twenty-two-year-old had a credit score in the high 700s.

A wonderful gift any parent can give their child is to help them establish good credit. Teaching the principles of financial integrity and maintaining good credit is critical to helping your children transition into adulthood.

Here are some guidelines to help parents get started on training their children to establish credit:

  1. Model responsible use of credit.
  2. Have family discussions on your budget regarding discretionary spending.
  3. Don’t assume your child has learned what they need to know about credit in school. Talk to your child about establishing and maintaining credit.
  4. Help your child to develop self-control. Early in their lives, teach them that you cannot afford to buy everything they want. Discuss with them the need to make choices and prioritize needs over wants.
  5. Demonstrate self-control by saving for larger, discretionary purchases. Share information with your child on how your savings are accumulating and how soon you will be able to make your purchase.
  6. Help your child develop a savings plan when they are young. Putting aside even a small amount each week or month can result in a tidy sum by the time they graduate high school. This money can be applied to college or their first car.
  7. Co-sign for a credit card for your child and discuss their spending habits each time the credit card bill comes. Discussions should be positive and affirm good decision-making. A good time to do this is when they start driving and going places without you.

Children do not instinctively know how to establish credit and maintain a good credit record. They must be taught, and it is your responsibility as their parent to instill good credit decision-making skills. Good credit will pay great dividends in your child’s future. “Train up a child in the way he should go, and when he is old, he will not depart from it.”  Proverbs 22:6

For more tips to help you manage your financial resources, please see my other blogs in the Finance tab. My book, Honoring God with Your Money, is full of guidelines to help you use money in a way that builds true wealth. Click here to sign up for my quarterly newsletter:

%d bloggers like this: