Piggybacking: A Way For Teens And Young Adults To Learn Proper Credit Practices
Those who are parents realize that they are the predominant source of guidance for their children during their formative years. Often, money management is one of these aspects, particularly when kids are in their late teens and early twenties (or, ideally, just beginning to learn the basics of how to eventually live on their own).
One way you can teach your kids about this concept is a practice that's sometimes called "piggybacking." This involves making them authorized users of one of your credit cards so they can make purchases and develop a positive credit rating - as well as helping you maintain your positive credit score, if they go about the use of the card properly.
A few fairly simple, closely followed practices can make this piggybacking process work to your advantage as well as that of your kids. Monitor the account extremely carefully, and, if possible, set limits on the spending for authorized users. If you have to make those limits apply to yourself as well, that might not even be the worst idea - a bit more careful spending never hurt anybody, provided you won't need to be making many large credit purchases on your own in the immediate future.
However, you'll want to supervise their use of your card as best you can. After all, any excessive purchases they make with your card, in your name, that you can't pay for at the time of the bill will hurt your credit and theirs. Additionally, depending on your card company, your creditors might not report the activity of your authorized users to the three major U.S. credit bureaus, which would effectively make your efforts moot.
Other practices you can use to help your older kids build credit are assigning utility bills in their names if they live in an apartment or helping them apply for a secured or student credit card.
