If you think showing your teenager how to balance a checkbook is hard…try explaining how to maintain good credit! Ah, the joys of adulting.

Many adults don’t quite understand the intricacies of the credit system. So, the idea of breaking it down where a teenager can grasp the intricacies is laughable. Yet, it must be done! Otherwise, your impressionable teen may fall into a very expensive trap when they turn 18. As of 2018, the average American carries around $90,000 in debt (1). Of that debt, the average credit card debt is around $6,849 (2). Yikes! That’s not even taken the interest and fees into account.

Let’s take a step back—before stress overwhelms you and this browser mysteriously shuts down—and start at the beginning.

Establishing Good Credit for the First Time

It can be very overwhelming to try and establish credit. There have been major changes since the 2008 financial crisis. Most traditional credit card and finance companies will deny an application due to the lack of history, which feels like being stuck in a hamster wheel as you try to establish that history. You keep going in circles, getting nowhere fast!

Here are three effective methods for starting out on the right foot:

Open a secured credit card account. This simple option does require a little money upfront. It’s also the only option that doesn’t require a third-party to be involved. You provide a set amount as a deposit in return for a small line of credit. Over time, and with responsible use, this will build a positive credit history. Your teen must be 18 to apply.

Being an authorized user on an existing account in good standing. This option has no upfront costs and the fastest results. You can add an authorized user at any age, which means you can build their credit prior to them being 18. PRO TIP: You do NOT have to provide authorized users with a card for this to work (wink, wink).

Obtain a loan with a co-signer. This method is a great mix of the above two options. Again, if you trust your teen, this is a great way to help them build credit. Just like option 1, your teen must be 18 to apply for a loan.

Keep your eyes peeled for more helpful articles to teach your teen responsible credit habits. Be sure to follow us on social media, too, for more tips. Who knows, you might learn a thing or two, as well!