When each of my children were 16, I took them to the nearest bank (not one I banked at) to open a bank account. They had money to deposit into it, and learned how to check their balance online and so on. After about a year, before leaving high school, I took them in again to apply for a credit card. Many banks have special cards for students with no annual fees, that sort of thing. They had literally no income, just allowance, but the bank gave them cards. The bills came to their home, which of course was also my home. We monitored what they were spending and ensured the bills were paid in full each month.
This had three benefits, one of which was unexpected:
- they could always put gas in the car or otherwise deal with emergencies while they were out on their own.
- they learned how to handle credit and pay bills
- they built up amazing credit scores.
When the time came for college, we had them apply for loans and told them we would be making the payments. (Opinions vary, but we were put through college by our parents and graduated without loan payments, and we wanted to give the same to our children. I will not be answering comments about whether this is a valid choice or not.)
Think about it: at age 22 or so, they had a 4 year flawless record of having paid their bill in full every month. Never late! My oldest was able to buy a new car with no co-signer. (She was the only one who wanted a car upon graduation.) As we paid their loans (again, always on time) their credit scores only got better. And because they knew not to run up a ton of credit card debt and hope to be able to pay it later, these scores were actually pretty accurate. They have made things much smoother in early adulthood.
At age 12, don't do anything, except maybe open a bank account for them and teach them how to save. Get them their own credit card (in their name, not a card from your account that they can use) and teach them to use it towards the end of high school, while they are still likely to be living with you for a year or two, but are often out on their own for the day. It will have immediate practical benefit and later credit score benefit. And do not pay anyone to help improve anyone's credit score, ever. That's a scam. Use that money to save for college or other things they may want as young adults, like a house downpayment.