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What Is a Credit Score?

A credit score is a numerical indicator of how responsibly someone manages debt. In simple terms, it answers the question: Do you pay your debts on time?

Credit scores exist because lenders want to measure risk. If you want to borrow money, your credit score matters. If you do not plan to borrow money, its importance decreases significantly.

Here’s the key reality: A credit score cannot exist without debt.

That raises an important parenting question: Do we want our children taking on debt simply to build a credit score? And is that wise financial formation?

 

Where Credit Training Should Begin

Training a child to use credit wisely does not start with giving them a credit card. It starts with the parent.

Before teaching kids financial tools, parents should first grow in their own financial stewardship, learning to budget, save, and eliminate consumer debt.

Children are incredibly perceptive. They can recognize hypocrisy quickly. It is difficult to train a child toward financial wisdom while consistently modeling financial chaos.

That said, this does not mean parents must be perfect before they begin teaching. Rather, it means parents should be honest.

If you are still learning, bring your children into that journey. Talk openly about mistakes, lessons learned, and what you are doing differently now. Humility is a powerful teacher.

 

Teaching Kids Financial Wisdom in Practice

Financial education should begin long before credit enters the picture.

A helpful approach includes:

Early Training (Ages 5–12)

  • Start with a simple allowance around ages 5–6
  • Teach kids to budget what they receive
  • Encourage saving for short and long-term goals
  • Introduce basic concepts like spending, saving, and giving
  • Allow small mistakes so they can learn consequences safely

Pre-Teen to Teen Years

  • Shift toward a monthly “income” model to mirror real life budgeting
  • Teach the concept of delayed gratification
  • Talk openly about debt and its risks
  • Explain co-signing and why parents may or may not choose to do it
  • Encourage saving for larger goals like a car, college, or future housing

 

Introducing Credit (If and When Appropriate)

There are differing opinions on how and when to introduce credit.

One approach is around age 16:

  • Consider adding a child as an authorized user on a parent’s credit card
  • Set strict limits and closely monitor spending
  • Require full repayment of any charges made

However, some parents prefer not to introduce credit cards at all during teenage years. An alternative approach is:

  • Using a teen checking account with a debit card
  • Allowing controlled spending from real money rather than borrowed money
  • Providing oversight while still building independence

Many banks offer teen accounts that allow parents to maintain visibility while giving the child real-world financial experience.

 

Transitioning Into Adulthood (Age 18 and Beyond)

At adulthood, financial responsibility shifts significantly. Some parents may choose to help their young adult child begin building credit through a small, controlled credit card, often used only for essentials like gas and paid off in full each month.

If this approach is used:

  • The expectation must be full monthly repayment
  • The parent should maintain oversight if possible
  • The card should be revoked if it is misused (where legally possible)

However, parents must also understand that once a child becomes an adult, legal boundaries change. At that stage, control is no longer absolute. Guidance replaces enforcement.

 

Avoiding “Helicopter Parenting”

One of the greatest risks in financial parenting is becoming a financial helicopter parent…over-controlling, rescuing, and insulating children from consequences.

While well-intentioned, this often creates:

  • Dependency instead of independence
  • Lack of resilience
  • Poor financial decision-making in adulthood

Sometimes the most effective teacher is natural consequence. Parents must resist the urge to constantly bail out adult children from financial mistakes. Discomfort can be a powerful and formative teacher.

 

A Valuable Financial Lesson for Kids

If there is one foundational lesson children must learn, it is this: The value of a dollar. Before credit scores, credit cards, or loans, children must understand:

  • Money is limited
  • Spending has consequences
  • Budgeting is essential for long-term stability

A child who understands the value of money will naturally understand the risks of debt and overspending.

Without that foundation, credit becomes dangerous rather than useful.

 

Final Thought

The goal of financial parenting is not to build a child’s credit score, it is to build their wisdom. Train them early. Teach them consistently. And above all, model what you hope they will become. As Scripture reminds us:

“Train up a child in the way he should go…” (Proverbs 22:6)
“The borrower is slave to the lender.” (Proverbs 22:7)

 

 

Next Steps

 

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The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.  Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

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