It is never too early to start practicing good money habits. In fact, the earlier teenagers are exposed to good financial habits, the better chance they will become financially savvy. This is an important life lesson in general, but especially if college is on the horizon for your teenager. Becoming a college student is probably one of the most exciting and immediate milestones for high school students when they look towards their future. Not only do teenagers feel a sense of freedom regarding important life decisions, but they will also be handling their own finances – including decisions regarding loans.

For some, the transition to handling their own household finances will be an easy step, for others, it might represent a 12-foot hurdle. Give your teen the best financial head start possible by working financial topics into everyday conversations. By helping your teen learn money management lessons with smaller amounts of money, by the time they graduate college, they’ll be prepared for managing their finances with a full-time job.

If you’re not sure where to start the conversation with your teen, try some or all of these six ideas:

1.   Give them an allowance

Allowances can be a controversial topic. For some households, this lesson works extremely well, and for others, it may be less feasible. Parents who find success with allowances have a set of rules and conditions their children have to follow in order to earn their allowance. It might seem best to tie the allowance to chores being completed, but try to resist tying all the money to chore-related tasks. Children should be expected to assist with family tasks and not have an expectation of always being paid for helping around the house. A key component to being an active member of a family is participating in daily tasks. Create not only a mix of tasks (a chore, education, or sports-related) but achievements as well, and be creative with it.

For example, you can provide an allowance of $2 per day, but perhaps with the condition attached that the child is responsible for paying the additional amount for their gym shoes beyond the $40 you are willing to pay. (Be prepared, as well, for a child that then chooses to select a pair of sneakers that cost $28 and is expecting the $12 difference of what you were willing to spend. In this event, you are well on your way to raising a financially savvy kid.) Other parents choose to allow their teen $20 a week for gas, but the child has to fill up the tank. If there is any extra money left over from filing the car with gas, they can keep it for other spending or saving goals. You’ll be surprised at the success of giving children an allowance and empowering them to use it responsibly.

2.   Work on a budget

Teenagers, especially high school students, want to have fun and enjoy their time to the fullest. This does not, though, always come with the responsibility of paying the greatest attention to their spending. It can be even harder when teenagers don’t know how their parents are managing their finances—good practices and discipline are the best example you can provide your child(ren).

Budgeting can’t be mastered overnight, which is why it must be taught. Ask them to be involved in your weekly household goods shopping and in creating monthly budgets. If they’re working a part-time job, assist them in creating a budget plan and saving for college or other saving goals such as their own car. Children crave discipline and boundaries—and financial discipline is so very important. Budgets help teach them that fun is possible, but that it has limits and comes after their responsibilities have been met.

3.   Teach them about debt and its consequences

High school students, regardless of their post-12^th grade plans, should know about the cost of going to college and the consequences of debt. Even if parents plan to pay for the child’s entire college education, things can change. Some parents make the mistake of putting education first, but not talking about the work it took to build-up the college fund. Again, teaching and exampling discipline and focusing on a long-term goal is key to success.

Let teenagers make monetary mistakes, and show them how every action has consequences. If the teen goes over budget one month, they need to learn that in the next month they will have to cut back on a category, such as going out for ice cream. The same goes obviously for college. Going shopping and for lunch—while therapeutic—can have expensive long-term consequences. Help teach your teen that the $60 shirt and $20 burger platter actually costs significantly more than $80 in the long-term when it comes to paying back student loans over 10 years with interest. Showing them the burden of debt will be one of the greatest lessons that every parent can teach their children, regardless of the parents’ income. While it is much easier to simply hand out cash and cover all of your child’s “expenses”, having them put some skin in the game and figure out debt management can be invaluable.

4.   Practice delayed gratification

The toughest lesson for everyone, especially teenagers, is making them wait to buy what they want. We all have a natural urge to buy things we want or like immediately. For that reason, it is even more crucial that parents practice delayed gratification with teenagers and resist buying things they want versus what they really need.

For instance, if their classmate shows off the latest tech gadget or fashion trend and thus your teen wants to have the same, tell them to wait until the next week or even the next month. If it’s just a want, make the teen contribute part of the cost, too. The age-old question of, “Is it important enough for you to spend your money on it?” is huge in teaching want vs. need. Chances are, once time passes and they’re faced with paying for it themselves, the desire will likely fade. It is also important to note that if they do pay for it themselves that you let them do so. It is a bad lesson to pay for the item at the 11^th hour because you will have undermined your own credibility and the practice of delayed gratification. Another bonus of having the child pay for the item themself is that you will be pleasantly surprised at how well they take care of the item(s) they purchase with their own money!

5.   Instill good credit score builder habits

The term “walk the walk” is especially important in teaching kids financial well-being. Kids are a sponge and absorb more than we likely know. It is always a good idea to be a financial role model to showcase healthy money habits and attitudes on a daily basis that your teenager can follow. Be certain to focus on just that child when reviewing their financials habits, and avoid comparing them to you or their siblings. You want to build good habits by empowering them to follow your example, not just doing something because they have to. They will eventually take ownership of good habits (or bad habits, depending upon the example you provide) and will continue to use them throughout life.

Properly educating your child on financial consequences can help your teen to make the right choice when making financial decisions. One important consequence to relay to your teenager is how a credit score can affect their future finances. One avenue to help your teen have a good credit score before going to college is giving them access to a credit card. Of course, before giving them a credit card be sure they have shown and demonstrated good money habits. It’s easy to overspend with a credit card, which is a lesson young adults often have to learn in college when credit card companies are offering cards left and right. So walk them through the fees and benefits of different cards, and best practices regarding credit card usage, so they can work towards the perfect credit score. Many graduates find themselves with little to no credit when it’s time to buy a car or get a loan or even rent an apartment if they haven’t started working on building their credit score throughout college. Prepare your child ahead of time, and they will thank you for it.

6.   Make small savings goals

Take baby steps toward building a savings account for their own goals, but be stern in importance of saving. If you provide an allowance, mandate that the first 10% go directly to savings before any other spending occurs. Once this habit of saving—frankly, of paying themselves first—takes hold, it will become second nature as they move through life and get better jobs and make more money. It is also important that with this savings, they have the ability to work toward a goal. Saving just to save is important, but it is equally important to save for something important. Ask your child what they want to have the most and help them define their goals. It could be a new iPad, a pair of new kicks or a trip with their friends. Whatever it may be or how ridiculous it may seem to you as an adult, it will help motivate them to save.

Once they are motivated to save, open savings account for teaching teens about money to which they can contribute each week. Perhaps even offer to match their contributions up to a certain amount each month. 

At the end of each month, show them the monthly bank statement. Seeing their progress will push them to put more toward their goal each week. Then once the first savings goal is accomplished, you and your teen can start moving to bigger and more valuable goals, like their first vehicle.

Many adults who learn about proper money management learn the hard way. A common thread in personal financial recovery stories is a journey to “rock-bottom.” Often, a financial crisis is necessary to motivate people to change behavior, learn to be responsible for their finances, and set them on a path towards improvement. This type of trigger seems to be built into human psychology.

Many recovering drug addicts, for example, didn’t admit they had a problem until their life was so unlivable that they had no choice. The stakes when dealing with financial problems are usually not as high, but the concept is similar, and is repeated all the time.

But for kids now, it doesn’t have to be like that. If you are a parent, you can be both a model and a teacher on how to manage money and here, we’ll dive into techniques to do just that. The problem is that studies show we’re failing to teach our kids about money. Get a load of these statistics:

A T. Rowe Price survey showed that half of parents are reluctant to talk about money with their kids.

That translates to 8% of parents who never talk about money with their kids, while 28% talked to them about money one time a month or less (this is actually an improvement from a few years ago).

In an earlier study, only 15% of parents surveyed actually set aside specific time to talk to their kids about money.

Another study showed that most parents consider some money topics off limits, like family finances, parental income, investments, and debt.

One of the unintended consequences of not talking about money is that parents end up supporting their children well into adulthood.

Surprisingly, Merrill Lynch found that children get more expensive–not less–with time: 79% of parents provide their young adult children with financial support. Parents spend twice as much on their adult children than they do on elective retirement savings.

That’s not good for retirement, nor is it setting your children up for long-term financial success.

We could do better. And we need to do better. Teaching kids about money should be right up there with teaching them to cook, clean, and do their laundry before they graduate high school! Managing money well is an essential life skill. We aren’t born knowing how to fund an emergency account or how to think about our retirement goals. Kids need to be taught (or learn the hard way) everything from simple savings to complex investing. And if it’s not taught? Those kids might end up depending on you for longer than you’d like.

Teaching kids about money and how to do so is a life lesson that will shape their financial future and lead them to financial independence. When saving becomes part of their routine at an early age, it’s a habit that will continue through all stages of life. So, consider the following tips when teaching your child about saving:

1. Teach by example

Children learn by mimicking the actions of others, so it’s important to set positive examples of financial responsibility. To teach them the basics, demonstrate how you earn, spend, save, and give. Show them real life examples of the benefits of saving money, whether it’s putting money in your emergency fund for when something goes wrong, saving up for a fun family vacation, or simply taking a trip to the ice cream shop.

2. Cash is a teaching tool

Limit your handouts, and instead let your child earn cash by completing chores or helping out around the house. Encourage them to count the money and separate it into clear jars for saving, spending, and giving. Cash is tangible, and the concept of seeing physical money grow will resonate with them.

3. Open a savings account

When your child is old enough, take them to the bank with cash they’ve earned and help them open their first account. Teach them how to read the statement and show them how the balance grows each time they make a deposit. The sense of pride and responsibility that comes with having their own account will be another incentive to keep saving.

4. Set goals and save up

Have your child make a list of items or experiences they want to save for and be sure to include the price and timeline. Review the list together and decide what the first savings goal should be. Choose an inexpensive item with a short-term “save by” date. This will not only teach your child how to save but also show them how to prioritize financial planning. Have your child deposit money into their savings account each time they earn money or receive it as a gift. Once your child has saved up enough money to meet their goal, take them to the store with their cash to purchase the item themselves.

5. Saving can be fun

Praise your child and use positive language to verbally encourage them. Bring them to the bank with you and make it an exciting outing for you to do together. Let your child decorate their money jars or piggy banks to really make them their own. These things will encourage them to take ownership of their money and decisions, helping them continue saving and making smart financial choices.

One of the most important jobs of a parent or caregiver is to help children establish healthy habits that will prepare them for lifelong success. From catchy songs and rhymes that teach a toddler how to brush and floss their teeth correctly to reminding your teen for the thousandth time to wear their seat belt, parents play a monumental role in getting kids ready for whatever life throws at them. But are we, as parents, including essential lessons about money into the mix?

Here are 3 money lessons that every parent should teach their kids…

Lesson # 1

How to Work Within a Budget

Financial education for kids is something that many people struggle with, particularly young adults. However, teaching this money lesson to your children helps them to build an understanding of the concept, along with the confidence to do it successfully. It also allows them the opportunity to fail, if necessary, in an environment that is safe and carries little consequence in the long term. So what does a lesson in budgeting look like?

Here is an idea to help you get started:

Give your child an allowance, and then help them divide it into a budget. Many people like to allocate a percentage for saving, a percentage for spending on a need and then a percentage for spending on a want. Be sure to assist kids with making these calculations and then become their accountability partner.

Lesson # 2

How to Understand the Time Value of Money

If I asked you whether you would rather have a penny doubled every day for 30 days or a million dollars, many people would quickly pick the million dollar option. However, a little math would reveal that if you chose the doubled penny, you would net over 10 million by the end of the 30 day time frame. This fun exercise helps to demonstrate the importance of the time value of money.

For a very practical way to put this into practice with kids, consider this idea:

Open up an interest drawing savings account for your kids. Provide them with a seed deposit, or let them invest their own money. Each time they receive an interest payment from the bank, track it and discuss how the money is growing. Encourage them to add more and see it grow too.

Lesson # 3

How to Save for Something Big

Begin by explaining that many times we want to purchase something that we don’t have enough money to buy right now. In order to be able to buy it, we have to set back money in increments until we reach our goal amount. Depending on the age and interests of a child, walking out this lesson could take a few weeks or possibly years. 

Here is a great way to apply this lesson:

Discuss a savings goal with your child to purchase something “big” they want to buy. Begin tracking the progress to the goal, discussing challenges and setbacks that occur along the way.