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7 Ways to Help Your Teen Build Credit

When it comes to having teenagers, there are a lot of things we as parents need to teach them. And nowhere is this more important than when it comes to to their financial education. Teaching our teens about money, finances, credit scores, etc. is extremely important to do before they leave the nest. There are many different ways we can go about this, of course. But, one of the most important things I feel that we can teach our teens is what a credit score is and how it impacts every aspect of their future financial lives. Therefore, before they leave the nest to fly on their own, helping a teen build credit is high up on my list of important lessons.

1. Get a job

One of the first things I told my teens when they turned 16 was that getting a job would be a good first step into the adult world. Not only does this give them some idea of what to expect in the work world, but it also gives them a first taste of managing their own finances usually. As a bonus, getting a job helps a teen begin to build their own credit.

2. open a checking account

Once your teen has a job, opening a checking account for them is the next best step to help them build credit. Most banks won’t let a child open a checking account on their own, so you’ll need to be a co-signer on the account until they are 18. This is also helpful when it comes to monitoring their spending, as it gives you a way to see everything that’s happening with their money. And it gives you good talking points to discuss with them about budgeting, when they get off track. Which my teens have done more times than I’d like to admit!

3. open a savings account

Whether your teen has a job and/or checking account, they can still get a savings account. We started savings accounts for our kids when they were much younger, just to put money into for them that relatives gave them for holidays. Having a savings account is a good way for them to watch a nest egg grow. And we have found it’s also a good place to put excess money they earn from their jobs is a savings account. This has helped rein in and regulate their excess spending on random junk they don’t need and help them save for bigger goals at the same time.

4. Open a Roth ira

When our kids started working for me, I opened Roth IRA accounts for them. These types of accounts can only be funded by earned income. So they can’t be opened until your teens have earned income that will be taxed. But, once they have some earned income to work with, you can open a custodial Roth IRA for them that will roll over directly into their name solely once they turn 18. This not only gives them a good first taste into investing, at much lower risk than when they do it as an adult, but also helps your teen build credit.

5. get a prepaid credit card

The next option is to help them get a prepaid credit card in their own name. Typically, you’ll have to be a co-signer on the account, as with all of the other accounts. But, with these types of credit cards you determine how much is put on the card to begin with, so that is all they have to spend. This works out really well if they have a job already also. You can tell your teen to set aside $100 – $500 to put onto the prepaid card and then use this card for all of their purchases. This way they are building credit while only spending the money they already have.

6. credit card authorized user

As another option to the prepaid credit card, you can add your teen to one or more of your existing credit cards as an authorized user. I did this for my two older teens just recently with one of the credit cards we never use that also has a high credit limit. I chose to put them on this one since we don’t use it because it’s easier for me to track who is spending what. Plus, since it has a really high limit, it helps boost their credit that much faster due to the amount of credit used versus the credit available. So far, they’ve both been paying off what they spend before the bill even closes, which is awesome!

7. teach them about credit scores

After all of these other options, the most important thing to teach them about is their credit score. Since they are trying to build credit, understanding how their credit score impacts their financial future is integral to overall financial health. If they have any of the aforementioned accounts opened, they can begin to see how their saving and spending are affecting their credit score. Which is a fantastic way to give them an early taste of how the whole system currently works. And don’t forget to show them how to pull their annual credit report each year so they can run through it for any discrepancies.

Teen building credit summary

Overall, there are a lot of great ways to start helping your teen build their credit score early on. While I don’t use the prepaid credit card method, I have used every other option to help my teens build their credit now. And, they’ve been doing awesome so far with the learning curve. So my hope is that by the time they are out on their own, they won’t have nearly as many issues as a lot of young adults do with their first taste of financial independence.

What are your favorite ways to help your teen build credit early?

How to Make Teaching Young Children About Finances FUN!

When you have young children, teaching them about money is a big part of our job as parents. And this is especially important when they are young because they learn so much more quickly when they are younger. And, they are more apt to listen to us and follow our actions because they look up to us greatly at this age. Not as much once they hit the teenage years! To the earlier you can start, the better.

But it’s not always easy, or fun. Especially when they are really young because the concepts can be much too difficult for them to grasp. However, I have found some great ways to make teaching young children about finances fun. And not just for them!

grocery list

One of the easiest financial lessons I found to begin with was grocery shopping. When my children were around the age of 2, they began helping me make a grocery list. I found the best way to approach this was to have them go through the pantry and refrigerator while I wrote down a list. They would  ell me what they thought we needed and we would discuss it. Because sometimes what they thought we needed was ice cream and cookies!

Whenever we went to the store I would have them help me decide which items to buy. I started out simply by comparing the same item but different brands. That way it was easier for them to see the cost difference between the two products.

Example: If Brand A can of beans costs $.89 and Brand B can of beans costs $.99, which one is the better deal.

This math is usually simple enough for them to grasp when they are much younger. As they got a bit older, I would increase the complexity of the math needed. In that, I would then compare similar products that had different quantities also. This can be pretty confusing for them initially. But once they understand it, it’s a really fun game for them to find the best deal.

allowance budget

Every member of the family should be pitching in to help. So, chores and allowance are another great way to approach teaching young children about finances. However, with the allowance comes some strings. Besides not getting paid if they don’t do their age appropriate chores, they also have to create a budget for it.

One of the most common ways to create an allowance budget is to split it up into the following 3 categories:

  • Donations
  • Saving
  • Spending

Of course, you can discuss this with your children because they may have other categories in mind. But these 3 categories are usually the most simplistic to begin with.

Once you have the allowance budget categories defined, then it’s a good time to open the discussion with your child regarding how much should go in each category. Percentages are easier for us as adults, but may not be as easy for your young child to grasp.

Therefore, if may be best to start with a specific dollar amount in each category.

Here is a good example of both options for a simple $10 allowance since this number can be easier for them to understand from a percentage perspective.

  • $10 = $2 for Donations, $4 for Saving, $4 for Spending
  • $10 = 20% for Donations, 40% for Saving, 40% for Spending

Ultimately, how this is broken down is completely up to you and your child. The main point is that they begin to learn the basics of budgeting their income. So that it will be much easier for them as adults when they have to do it for themselves.

sell their old stuff

As most of us know, with children comes a lot of extra stuff. And as they grow, they outgrow that “stuff” fairly rapidly. Most of the time, the majority of it is also barely used. So, this is another great area to weave financial lessons in for your young child.

When it’s time to declutter the house, have your child go through their stuff to sell also.

The first thing to go through with them is which items they might be able to sell. And then you should have them help you figure out how much they think they can sell the items for.

A lot of times I prefer to sell my kids outgrown stuff online. But, having a yard sale is another great way to approach this lesson since your child will have to be physically present for it.

This lesson helps to teach them the value of their stuff and the value of a dollar. So, it’s really a two-fold lesson that is extremely important for them to grasp now.

Plus, it’s a great place to add on a third lesson while you are at it. Let them keep the money they make on their stuff and put it into a high yield savings account. That way they can watch it grow each month and you can help them learn about compound interest. Now, I call this a big win!

Birthday Budget

And last but not least, the birthday budget. I think my kids always think that money grows on trees. Which is extra funny because we actually have a money tree, but it doesn’t grow money!

With that being said, their birthday wish lists always start out much further outside the budget than they think. So, it’s a good time to bring them back down to earth and have them help with a more realistic birthday list.

First, let them know what the budget is for their birthday. The best way I have found to do this is to tell them that they need to find some gifts that are under $20 and they can find one or two that are closer to $40 – $50 also.

This way, the majority of the birthday gifts they want fall into most people’s budget. And the couple of larger gifts could be from us or a joint gift. But, I also let them know that they will never get everything on their list. That way I help to set up their expectations and keep a bit of the birthday surprise going.

Teaching young children about finances

Overall, there are a lot of great ways you can begin teaching young children about finances and it still be fun. My favorite ways include:

  • Having them help make the grocery list and compare food prices
  • Make an allowance budget
  • Selling their old stuff and putting the money into a high-yield savings account
  • Creating a reasonable birthday budget

If you can start with these easy lessons, then you are well on your way to increasing your child’s financial knowledge. And the earlier you can start, the better. So, have fun with it and get started today!

What are some of the best ways you have found to teach your young children about finances and still make it fun?

Kids Making Money

How to Teach Kids to Make Some of Their Own Money

Having our kids do chores is one way for them to make some of their own money. But, we always want to get their creative juices flowing thinking about other ways to make money also.

After all, part of our job as their parents it to teach them to problem-solve and how to survive in the world without us. So, when my 10 year old daughter came to me with an entrepreneurial idea to make some money, my ears perked up.

Read more

Summer_Vacation_For_7

How to Execute a Family Summer Vacation for Under $400!

By now, you should realize that we like to do things frugally around here. And we pretty much have to in order to make our blended family of 7 work, and not kill our finances. That being said, we have multiple budget strategies that we use, and that includes when we want to take the whole family on vacation. Take a look at how our family summer vacation strategy worked out so that we only spent a total of $393.93 for 4 days! Read more

Frugal Home Hacks that Save us Hundreds Per Month

pexels-photo (2)

They say that necessity is the mother of invention. There’s lots of truth in that quote. For us, the necessity to keep trimming our spending as we work our way out of debt has helped us to “invent” more and more ways to spend less and less of our money on things we need to buy. As we work on our financial goals we work on increasing our income, but we also continue to work to cut expenses. For instance, in order to reach our 2014 grocery expenditure goal we spent only $215 on groceries in December 2014. For a family of six, that took a lot of work, but it showed us that we can spend less if we need to.

We haven’t been that extreme in a long time, but we do continue to look for ways to cut down on home expenses and save money. I would say that our savings as we work on cutting expenses are now easily in the four digits compared to our expenses when we started our journey in 2013. So I thought I’d share some of our frugal home hacks today and how much money we’ve saved per month by continuing to look for ways to cut expenses. Read more

12 Things You Need to Know About Your Money

So, I’m confessing off the bat that I’ve ripped off this post idea from Rockstar Finance. The short, but thought-provoking post needed an expansion – at least in my mind.

The fact of the matter is that too many people don’t have as much of a clue about their money as they should. They have no idea how much debt they have, when they’ll be able to retire or what they’d do if the financial SHTF in their house.

This post today is designed to help you answer those questions. Read more

6 Things You Might Not Know About Getting Out of Debt

A Journey to Get out of Debt Begins with a Single Step
A Journey to Get out of Debt Begins with a Single Step

Do you want out of debt bad enough to deal with the roadblocks, the emotional stresses and the lifestyle changes?

Is having financial freedom important enough to you to give up current habits and lifestyles?

Only you can answer that question. Only you can decide if it’s worth the work to create a more secure financial future for yourself. But before you answer, let me ask you some questions. I want to find out if you’ve ever dared to think ahead to a future full of debt and money worries. I’m asking these questions because asking ourselves these questions is what gave us the motivation to begin our own dumping debt journey. So, here goes: Read more

Three Exercises to Take Charge of Your Health and Your Wealth

3 Activities to Boost Your Health and Your Wealth
3 Activities to Boost Your Health and Your Wealth

Today’s post is a guest post from fellow blogger Joseph Chiweshe, a physician and blogger who shares about the connections between health and personal finance.

The connection of our health and finances is undeniable. They provide the basis for the freedom and ability to do the things we love in our day to day lives, and if either is out of balance it seems like that’s all your mind is preoccupied with.

There are three mindsets in which, if you are intentional in both your money and your health, will help assure that both your health and your money are running smoothly. Today I’ll talk about those three mindsets and how you can utilize them to be physically and financially fit. Read more