Summer Jobs: A Way for Kids to Learn About Credit

JUN 08, 2011

Is your teen or college-aged child going to work this summer? A summer job is a rite of passage – and, in this economy, a necessity for many people. It can be exciting for your child to earn – and spend – his own money. Plus, a summer job can be a great opportunity for you to help your child learn about credit.

Since children have not used credit in the past, credit bureaus don’t have credit reports on file and are unable to issue credit scores. Nevertheless, once your child becomes a teen and starts earning their own money or goes off to school, it’s time to teach him the basics of credit use. A great way to do that is to run a quick credit check.

A summer job affords all the elements you need to teach some important and effective credit and financial health lessons. Start out with a lesson in the advantages of direct deposit. Most employers now offer it. Direct deposit into your child’s savings or checking account can help control an impulse to spend what he makes before he’s really thought about it. It makes saving automatic and minimizes temptation by taking the actual cash out of his hands.

And the credit lesson here is two pronged: First, saving is good. Second, directly deposited funds are less exposed to potential theft than a signed paycheck carried around in a purse or pocket.

Next, take the opportunity to teach your child how spending can affect his credit report and score. If he doesn’t already have a debit or credit card, getting him one can be a good, controlled way to teach him how to use a card wisely. While a debit card tied to his bank account won’t necessarily show up on his credit report, credit card use certainly will.

Choose a credit card with as low an interest rate as you can find, and keep the credit limit low. When the first statement arrives, open it with your child and discuss the purchases he’s made and how he’ll pay off the balance. After a month or two of credit use, sit him down at the family computer and show him how to do a credit check on himself. Use online resources to help him understand the components of a credit score, how credit bureaus calculate it, what qualifies as a good score and how maintaining a good score can make his financial life easier.

The lesson will feel more relevant to your child if the money he’s using to pay for his credit is money he earned himself.